Iceland raises rates 125bp to head off ‘wage-price spiral’

MPC orders largest increase in two-year tightening cycle as inflation remains near 10%

Central Bank of Iceland

The Central Bank of Iceland raised its policy rate by 125 basis points on May 24 to 8.75%, as officials warned of a “wage-price spiral”.

The move is the thirteenth consecutive hike, and the largest in two years of monetary tightening. Over the last two years, the central bank has raised rates by eight percentage points.

In its policy statement, the monetary policy committee said it expected it would have to continue raising the policy rate. “It is necessary to tighten the monetary stance still

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