Business News
Iceland's central bank lowers interest rate to 9.50 per cent
Jan 27, 2010, 11:24 GMT
Reykjavik - Iceland's central bank Wednesday lowered its key interest rate by 0.50 percentage points to 9.50 per cent.
In its decision the Monetary Policy Committee said the currency has been broadly stable since the committee's last meeting in December and 'this stability has continued despite internal and and external developments.'
These events included the president's decision to call a referendum on whether to pay 5.4 billion dollars to Britain and the Netherlands for losses in a failed Icelandic bank.
The referendum is set for March 6 but the unsolved issue on the bank compensation plan had contributed to downgrading Iceland's credit ratings, the central bank said.
Inflation contined to fall in December and January, and in January was on 6.6 per cent year-on-year, the central bank said.
The central bank Sedlabanki's most recent rate cut was in December.
In October 2008 the global financial crisis sparked the collapse of three of the North Atlantic nation's major banks and a rapid depreciation of the krona.
In the wake of the crisis, interest rates at the end of October 2008 were hiked to 18 per cent, and Iceland secured a 2.1-billion- dollar loan from the IMF.
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