Iceland’s central bank left its key interest rate unchanged on Wednesday as policymakers assessed that the economic performance is set to be better than projected.
The Monetary Policy Committee decided to keep the rate on seven-day term deposits unchanged at 0.75 percent, the Central Bank of Iceland said in a statement.
The latest decision to hold the rate steady came after a quarter-point reduction in November.
Policymakers assessed the economic contraction in 2020 to be smaller than the forecast in November as domestic demand was likely stronger, the bank said in its latest monetary bulletin.
The forecast for this year is also for domestic demand to grow more than previously projected, whereas the outlook for exports has deteriorated, the bank said.
Economic developments will be affected by the path the coronavirus pandemic takes, the bank added.
The bank projected 3.9 percent inflation in the first quarter of this year. Price growth is then seen easing fast throughout the year.
“…there is still a sizeable slack in the economy and the krona has appreciated in recent months,” the bank said.
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