Iceland’s central bank raised its key interest rate by a quarter-basis point on Wednesday, citing higher inflationary pressures.
The Monetary Policy Committee decided to raise the key interest rate, which is the rate on seven-day term deposits, by 25 basis points to 1 percent, the Central Bank of Iceland said in a statement.
“It is necessary to raise the Bank’s interest rates in order to ensure that inflation expectations are anchored to the target,” the bank said.
The central bank raised its growth forecasts due to signs of a stronger recovery of domestic demand.
The bank now sees economic growth of just over 3 percent this year and more than 5 percent in 2022.
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