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Iceland raises key interest rate by 75 bps to 2.75% – Metro US

Iceland raises key interest rate by 75 bps to 2.75%

Iceland’s Central Bank logo on the wall of the bank’s
Iceland’s Central Bank logo on the wall of the bank’s main building in Reykjavik

COPENHAGEN (Reuters) – Iceland’s central bank raised its key rate to 2.75% from 2.0% on Wednesday, as inflation pressure fuelled by rising house prices persists.

Headline inflation rose to 5.7% in January, which is well above the central bank’s target of 2.5%.

“It is assumed that headline inflation will ease when house price inflation slows down and global price hikes taper off; however, it is not expected to align with the target until the end of the forecast horizon,” the central bank said in a statement.

The central bank, which raised the interest rate four times in 2021, now expects the economy to grow around 4.8% this year compared to the 5.1% it projected in November.

(Reporting by Stine Jacobsen; Editing by Toby Chopra and Catherine Evans)

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