Ice­land cuts its in­ter­est rate; cur­rency ad­vances

Kuwait Times - - BUSINESS -


Ice­land’s cen­tral bank yes­ter­day shaved its key in­ter­est rate by a quar­ter of a point to 5.0 per­cent, cit­ing the krona’s ap­pre­ci­a­tion and po­lit­i­cal un­cer­tainty fol­low­ing the coun­try’s October elec­tions. Gross do­mes­tic prod­uct, business in­vest­ment growth and ex­port growth had all been stronger than pro­jected for the first nine months of the year, the bank noted. The rate of inflation, which was 2.1 per­cent in Novem­ber, “has re­mained be­low tar­get for nearly three years” de­spite large pay in­creases and higher house­hold spend­ing. Fa­vor­able ex­ter­nal con­di­tions, the ap­pre­ci­a­tion of the krona, and a rel­a­tively strict mon­e­tary stance com­pared to the rest of Europe has mean­while slowed inflation, the bank said. But the in­crease in house­hold spend­ing has been weaker than ex­pected in re­cent months, and the fact that Ice­land’s po­lit­i­cal par­ties have not been able to form a gov­ern­ment since October 29 elec­tions, have sparked un­cer­tainty about the fu­ture budget, it noted.

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