JAKARTA (dpa-AFX) - Iceland's central bank lowered its key interest rate for the second straight month as the economy is expected to contract on weaker tourism activity.
The Monetary Policy Committee of the Central Bank of Iceland decided to slash the rate on seven-day term deposits by a quarter point to 3.75 percent from 4.00 percent.
The Central Bank of Iceland or Sedlabanki had lowered the rate by 50 basis points in May.
A contraction in the domestic economy is still anticipated and is expected to show more clearly in coming months. Although domestic demand remained more resilient than previously estimated, the outlook for tourism suggested deeper than previously expected contraction, the bank noted.
The central bank said that inflation has peaked and will ease back to target as the year progresses.
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