Rising interest rates predicted

A recent Dow Jones Newswire suggests that Iceland’s central bank may soon be raising their interest rates. The move is expected to occur following the release of inflation information from March by Norway and Denmark on Thursday. If the banks do increase their interest rate, it will be for the second time in just three weeks.

In a survey of economists conducted by Dow Jones Newswire, four out of seven believe that the Central Bank of Iceland will increase its key interest rate on Thursday. The move is expected to help offset pressure from inflation as well as increasing expectations about inflation rates.

This year has seen Iceland’s interest rates increase to unprecedented levels. The last increase came unannounced on March 25th, when the bank instituted a 1.25 percentage point hike, fixing the new rate at 15 per cent.

In the past six months, the declining economic conditions globally have particularly affected the Icelandic economy, with the country’s currency plummeting by 35 per cent during this time. The sharp drop in the value of the currency has only fuelled higher rates of inflation, rates which are well above what the Central Bank had predicted for the period.

In March, Iceland’s annual price rise rate was 8.7 per cent, whereas the bank had predicted a rate of just 2.5 per cent.

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