{"id":90654,"date":"2016-06-01T09:08:24","date_gmt":"2016-06-01T13:08:24","guid":{"rendered":"http:\/\/countingpips.com\/?p=90654"},"modified":"2016-06-01T09:08:24","modified_gmt":"2016-06-01T13:08:24","slug":"iceland-leaves-rate-steady-but-still-sees-tighter-policy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/06\/iceland-leaves-rate-steady-but-still-sees-tighter-policy\/","title":{"rendered":"Iceland leaves rate steady but still sees tighter policy"},"content":{"rendered":"
June 1, 2016<\/div>
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By CentralBankNews.info<\/u><\/a>
\n    Iceland’s central bank left its key policy rate, the seven-day deposit rate, steady at 5.75 percent and confirmed its view from last month that a “tighter monetary stance will probably be needed in the coming terms, in view of growing domestic inflationary pressures.”
    “How much and how quickly the monetary stance must be tightened will depend on future developments,” the Central Bank of Iceland (CBI) added, reiterating its guidance from May 11.
    But the CBI, which raised its policy rate by 125 basis points last year to curb inflationary pressures, added that it had cut the reserve requirements by 50 basis points, in line with its previous statement. The new reserve requirement on the reserve base will be 2.00 percent, as of June 21 while the minimum required reserve will be 5.50 percent as of June 11.
    Since the last meeting in May, the CBI said the economic outlook was largely unchanged, with rapid growth expected but inflation to remain below target well into this year due to the offsetting effects of domestic inflationary pressures versus the impact of the higher krona and low global inflation.
    Iceland’s inflation rate rose slightly to 1.7 percent in May from 1.6 percent in April, below the central bank’s 2.50 percent target.
    In its May Monetary Bulletin, the CBI lowered its inflation forecast for 2016 to 2.1 percent from 2.3 percent and maintained the 2017 forecast at 4.1 percent. The 2018 forecast was raised to 3.8 percent from 3.4 percent.
    A<\/span>fter losing about half its value during the global financial crises, Iceland’s krona has appreciated <\/span>gradually since March 2015 and was slightly firmer on today’s policy decision, trading at 124.3 to the U.S. dollar, up 4.4 percent since the start of this year.<\/span><\/span>
    The CBI forecasts economic growth this year of 4.5 percent, up from 2015’s 4.0 percent, and then 4.0 percent 2017 and 3.0 percent 2018.<\/span><\/span>
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<\/span><\/span>    The Central Bank of Iceland issued the following statement:<\/span><\/span><\/p>\n

“The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to keep the Bank\u2019s interest rates unchanged. The Bank\u2019s key interest rate \u2013 the rate on seven-day term deposits \u2013 will therefore remain 5.75%. The Committee has also decided to lower reserve requirements by 0.5 percentage points, in line with previous statements. <\/div>\n
The economic outlook is broadly unchanged since the last interest rate decision. The outlook is still for rapid GDP growth, and there is increased tension in the labour market. In spite of large pay increases and a widening positive output gap, inflation has remained below target for over two years. In May, inflation measured 1.7%, about the same as it did a year ago. As before, this reflects the offsetting effects of domestic inflationary pressures versus the appreciation of the kr\u00f3na and unusually low global inflation. Other things being equal, the outlook is for inflation to remain below target well into this year but then rise when import prices stop falling, as was assumed in the Bank\u2019s last forecast, published in Monetary Bulletin 2016\/2 in May. <\/div>\n
Global price developments and a stronger kr\u00f3na have provided the scope to raise interest rates more slowly than was previously considered necessary. By the same token, there are signs that monetary policy has anchored inflation expectations more securely than before and contributed to a more moderate rise in inflation than could have been expected in the wake of large pay increases. However, this does not change the fact that, according to the Bank\u2019s forecast from early May, a tighter monetary stance will probably be needed in the coming term, in view of growing domestic inflationary pressures. How much and how quickly the monetary stance must be tightened will depend on future developments.”<\/div>\n
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    www.CentralBankNews.info<\/a><\/div>\n
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By CentralBankNews.info     Iceland’s central bank left its key policy rate, the seven-day deposit rate, steady at 5.75 percent and confirmed its view from last month that a “tighter monetary stance will probably be needed in the coming terms, in view of growing domestic inflationary pressures.”    “How much and how quickly the monetary […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-90654","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=90654"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90654\/revisions"}],"predecessor-version":[{"id":90655,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/90654\/revisions\/90655"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=90654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=90654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=90654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}