Central Bank of Iceland - Annual Report 2005

According to the Central Bank of Iceland's Annual Report 2005, the macroeconomic imbalances that emerged in the second half of 2004 were substantially amplified in 2005.

Inflation, which had been just below target in the second half of 2004, rose in 2005. It twice breached the upper tolerance limit which is 1 ½ percentage points above the target. When this happens, the Central Bank is obliged to submit a public report to the Government explaining the reasons for the deviation. The rising rate of

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