Iceland’s central bank left its key interest rate unchanged in October, as the inflation expectations remain above target.
The Monetary Policy Committee, led by Governor Mar Gudmundsson, decided to keep its benchmark, which is the rate on seven-day term deposits, unchanged at 4.25 percent, the Sedlabanki said in a statement on Wednesday.
The decision was in line with economists’ expectations.
The previous change in the key interest rate was a quarter-point reduction in October 2017.
Inflation expectations appear to be somewhat above the target by all measures, the bank said.
“The MPC reiterates that it has both the will and the tools necessary to keep inflation at target over the long term,” the bank said.
“If inflation expectations continue to rise and remain persistently at a level above the target, it will call for a tighter monetary stance.”
The central bank also noted that the krona volatility increased in September, partly due to the uncertainty about one of the country’s major airlines’ financing.