Icelandic central bank hikes rate as inflation climbs


The Central Bank of Iceland raised its policy rate today (May 19), making it one of the first advanced-economy central banks to tighten policy since the Covid-19 pandemic began.

The monetary policy committee chose to raise the key interest rate by 25 basis points, taking it to 1%. In a statement, the central bank said inflation has been “higher and more persistent” than previously forecast, hitting 4.6% in April. The inflation target is 2.5%, with a tolerance band of +/- 1.5 percentage points.

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