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Statement of the Monetary Policy Committee 21 March 2012

Statement of the Monetary Policy Committee 21 March 2012 The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to raise the Bank’s interest rates by 0.25 percentage points.

The economic outlook is broadly in line with the Central Bank’s February forecast. The króna is weaker than in February, however, and the short-term inflation outlook has deteriorated somewhat from the forecast prepared at that time. Further ahead, there is the risk that inflation will remain above the Bank’s inflation target for a longer period than projected unless the króna appreciates in coming months. The extent to which closing the loopholes in the Foreign Exchange Act affects the exchange rate will emerge in the near future.

Moving forward, it will be necessary to withdraw the current degree of monetary accommodation as the recovery progresses and the slack in the economy diminishes. The degree to which such normalisation takes place through higher nominal Central Bank rates will depend on future inflation developments. In the absence of an improvement in the inflation outlook, a further increase in nominal interest rates will probably be required in the near term in order to bring the monetary policy stance, which is still quite accommodative, to an appropriate level.

No. 12/2012
21 March 2012

The rates will be as follows:

Central Bank interest rates 21 March 2012