03 June 2005

The Central Bank of Iceland raises its policy interest rate

The Board of Governors of the Central Bank of Iceland has decided to raise the Bank’s policy interest rate by 0.5 percentage points to 9.5% as of June 7. The Central Bank has now raised its policy rate by 4.2 percentage points since May 2004. In its quarterly Monetary Bulletin, which is published on the Bank’s website today, the Bank presents the arguments in support of raising the policy rate now. For some time the Central Bank has been gradually narrowing the spread between its deposit and lending rates and a further step in this direction will be taken on this occasion. Thus the rate of interest on the Bank’s overnight loan facilities will be raised by 0.25 percentage points and on credit institutions’ current accounts in the Bank by 0.75 percentage points. Interest rates on seven-day certificates of deposit will be 0.15 percentage points below the policy interest rate, i.e. 9.35%, and volume limits will be abolished in its weekly auctions as of June 7. The Central Bank’s interest rate corridor has been narrowed over one year from 4.9 percentage points to 3 percentage points.


For further information contact Birgir Ísleifur Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, tel. +354 569-9615


No. 14/2005
June 3, 2005


   Monetary Bulletin June 2005