Iceland Raises Interest Rates, Warns of Further Increases
August 19 2015 - 7:30AM
Dow Jones News
Iceland's central bank raised its key interest rates on
Wednesday and said it may have to hike rates even further, as it
tries to keep a lid on inflation following higher than expected
wage settlements.
The central bank, Sedlabanki, raised its main lending rate to
6.25% from 5.75% and its seven-day deposit rate to 5.50% from 5%.
The bank also raised rates by 0.50 percentage points at its last
meeting in June.
"If inflation rises in the wake of the wage settlements, as is
forecast, the MPC will have to raise interest rates still further
to bring inflation back to target over the medium term," the
central bank said in a statement.
"How much and how quickly will depend on future developments and
on how the current uncertainty plays out, including the degree to
which large pay increases are passed through to prices, on the one
hand, and the degree to which they prompt rationalization and
productivity growth, on the other."
Average consumer prices rose 1.9% on the year in July, up from
1.5% in June and 0.8% around the turn of the year but still short
of the central bank's 2.5% target.
Inflation is forecast to rise to 4% early in 2016 and to hover
in the 4-4.5% range over the next two years before easing toward
the target. The bank said this forecast implies that the monetary
stance will be tightened in the near future.
Write to Dominic Chopping at dominic.chopping@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 19, 2015 07:15 ET (11:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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