Iceland Central Bank Cuts Interest Rates By Half A Point

Iceland central bank cuts interest rates by half a point

REYKJAVIK, (Pakistan Point News - APP -24th Augst,2016) : The Central Bank of Iceland on Wednesday cut its benchmark interest rate by half a percentage point to 5.25 percent, saying inflation remained low despite rising wages and strong growth. "Inflation has remained below target for two-and-a-half years. In July it measured 1.1 percent, the lowest inflation rate since the beginning of 2015," the bank said. "The krona has appreciated markedly in the recent term, in spite of substantial foreign Currency purchases by the Central Bank," it added.

The bank increased its 2016 growth estimate to 4.9 percent -- a rise of 0.4 of a point compared to its forecast in May. It predicted 4.1 percent growth in 2017. "GDP growth is driven by strong income growth and improved households' and businesses' balance sheets. This is compounded by fiscal easing," it said. The statement confirms Iceland's emergence from the 2008 financial crisis, which crushed a banking boom and plunged the country into recession.

On August 16, the country announced it planned to lift nearly all the remaining restrictions on capital controls it imposed on its citizens to prevent a currency collapse. Prime Minister Sigurdur Ingi Johannsson on August 10 criticised the central bank for its high interest rates. In an interview with Bloomberg news agency, he asked pointedly "whether it's some sort of principle that Iceland has interest rates that are two to three percentage points higher than one would think is necessary."