30 April 2002

The Central Bank of Iceland lowers interest rates

The Board of Governors of the Central Bank of Iceland has decided to lower the yield in the Bank's repurchase transactions with credit institutions by 0.3 percentage points effective at the next auction of repurchase contracts on May 7, 2002. Other Central Bank interest rates will be lowered by 0.3 percentage points effective May 1, 2002.

On Tuesday May 7, 2002 the Central Bank of Iceland will issue its quarterly Monetary Bulletin. It will inter alia include a new inflation forecast for the next two years and a detailed analysis of the current economic and monetary situation and prospects. The inflation forecast and the analysis have largely been completed. The outlook is now for the inflation target being achieved before the end of 2003, as intended in the joint declaration of the Government and Central Bank of Iceland of March 27, 2001, and that the inflation rate will fall below the target in the first quarter of 2004 given an unchanged monetary policy stance. In addition, latest economic indicators point to an intensifying contraction of demand in the goods and labour markets. A detailed description of the rationale behind today's decision will be included in the Monetary Bulletin.

Nr. 5/2002
April 30, 2002