Iceland Central Bank Keeps Rate On Hold

dpa-AFX International Compact |

JAKARTA (dpa-AFX) - Iceland's central bank maintained its key interest rates, as widely expected, on Wednesday.

The Monetary Policy Committee of the Central Bank of Iceland decided to hold the seven-day term deposits rate at 4.25 percent. The bank had lowered the rate by a quarter point in .

Since the last meeting, the króna has appreciated and the foreign exchange market has remained well balanced.

Although inflation expectations appear to have risen marginally, inflation outlook remained broadly unchanged since the last meeting.

However, it is too soon to determine whether inflation expectations have become less firmly anchored to the inflation target, the bank said.

The high real exchange rate has slowed export growth, and the outlook is for the positive output gap to narrow. Nevertheless, the bank observed that a tight monetary stance is needed in order to contain rapid domestic demand growth.

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