Iceland Raises Base Interest Rate Again After 3 Months... Economic Growth Rate Expected to Reach 4% This Year

[Photo by Xinhua News Agency]

[Asia Economy Reporter Park Byung-hee] The Central Bank of Iceland raised its benchmark interest rate from 1% to 1.25% on the 25th (local time), Bloomberg reported on the same day.

Iceland was the first Western European country to raise its benchmark interest rate since the COVID-19 pandemic in May. At that time, the central bank raised the benchmark rate from 0.75% to 1%, and decided to raise it again after three months.

The central bank explained, "The economic outlook is improving, and the number of tourists is increasing faster than expected," adding, "Inflationary pressures remain relatively high."

Iceland's consumer price inflation rate in July recorded 4.3%. Although it slightly decreased compared to the 4.6% recorded in April, the highest in eight years, it still significantly exceeds the central bank's monetary policy target of 2.5%.

The central bank assessed, "Although inflation expectations appear to be declining, the pace of decline in inflation expectations is slower than anticipated in May."

The central bank revised its economic growth forecast for this year upward from 3.1% in May to 4%. On the other hand, it lowered next year's economic growth forecast, which was expected to be 5.2% in May, to a level similar to this year.

This content was produced with the assistance of AI translation services.