Iceland’s central bank raised its benchmark rate for the fifth time this year to contain high inflation.
The Monetary Policy Committee of the Central Bank of Iceland on Wednesday hiked its key seven-day term deposit rate by a quarter-point to 5.75 percent from 5.50 percent.
The central bank has lifted its benchmark rate by 375 basis points so far this year.
“The MPC will continue to ensure that the monetary stance is tight enough to bring inflation back to target within an acceptable time frame,” the bank said in the statement.
Headline inflation declined since the last MPC meeting but underlying inflation increased. There were also signs that inflation expectations started to decline again, although they still remained above the inflation target, the committee noted.
Further, policymakers observed that demand is likely to be strong in the third quarter but the outlook is for a slowdown as the winter advances.
Domestic demand is expected to ease more quickly than previously expected due to the deterioration in the global economic outlook and rising uncertainty.
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