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Iceland raises key interest rate by 75 bps to 2.75% -Breaking

by Mike Robinson

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© Reuters. FILEPHOTO: A church and the Icelandic national flag are seen in Vik, Iceland on April 22nd 2010. REUTERS/Lucas Jackson

COPENHAGEN (Reuters – Iceland’s central banks raised their key rate by 2.75% to 2% on Wednesday as rising housing prices fueled inflation.

The central bank has set a target for 2.5%, but headline inflation rose to 5.7%.

The central bank stated in a statement that it was assumed that headline inflation would decrease as house price inflation slows and global price rises taper off. However, the central bank did not expect the target to be met until the end-of the forecast horizon.

According to the central bank’s projections in November, the economy would grow at 4.8%, compared to 5.1% in November.

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