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Iceland interest rates cut to 9.5%

January 27, 2010 | “BBC News"

Iceland's central bank has cut interest rates unexpectedly by half a percentage point, from 10% to 9.5%.

Rates have now fallen significantly since March last year, when they stood at a record high of 18%.

Iceland had held rates high to defend its currency after the collapse of the country's banking system in 2008.

It is now set for a referendum on 6 March over debt repayments to the UK and Netherlands which were incurred following the collapse of Icesave bank.

The country's parliament voted for a referendum earlier this month after President Olaf Ragnar Grimsson vetoed the Icesave bill.

Uncertainty surrounding the vote meant analysts were surprised by the move to cut rates.

"We had actually expected them to stay on hold given the significant increase in uncertainty due to the non-signature by the president on Icesave," said Mats Olausson at SEB.

"But, at the same time, the outlook for inflation continues to go lower and domestic demand is very sluggish while the exchange rate has stabilised."

Iceland's financial system collapsed in October 2008 under the weight of debt, leading to a currency crisis, rising unemployment and public protests.

Company: Iceland

Full company nameIceland
Country of riskIceland
Country of registrationIceland

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