Iceland minutes shows dissent from MPC member

Fears that persistent inflation may place upward pressure on wages and inflation expectations and a further weakening of the króna led one member to dissent against the central bank's decision to keep rates on hold, minutes from the Central Bank of Iceland's Monetary Policy Committee meeting, published on Wednesday, said.

"In the Committee's view, the inflation outlook has deteriorated, at least in the near term, and inflation expectations have drifted upwards. Moreover, the result of the Icesave referendum has tilted risk to the value of the króna to the downside. On the other hand, however, the baseline outlook for growth and employment has deteriorated," minutes of the April 18 and 19 meeting said.

Four members voted in favour of the proposal by the governor, Már Guðmundsson, to keep interest rates unchanged, with the deposit rate at 3.25%, the maximum bid rate for 28-day certificates of deposit at 4%, the seven-day collateralised lending rate at 4.25%, and the overnight lending rate at 5.25%. However, one member voted against the governor's proposal, preferring to raise interest rates by 0.25 percentage points. This member, the minutes said, put more weight on the factors leading to more persistent inflation, such as wage pressures, higher inflation expectations and the possible weakening of the króna.

Click here to read the minutes.