JAKARTA (dpa-AFX) - The Central Bank of Iceland lowered its benchmark interest rate unexpectedly on Wednesday amid a recent easing trend in inflation.
The Monetary Policy Committee of the central bank reduced the rate on seven-day term deposits by 0.25 percent to 9.0 percent. Further, this was the first rate cut since November 2020.
The rate had been at 9.25 percent since August 2023.
The decision by the policy committee was largely based on the recent slowing trend in inflation, which eased to 5.4 percent in September.
The policy board assessed that the underlying inflation has subsided as well, and the breakeven inflation rate in the bond market has fallen.
Nonetheless, the rate is still far above the central bank's target range of 2.5 percent.
By keeping this in mind, the MPC noted that persistent inflation pressures, elevated inflation expectations, and strong domestic demand require a cautious approach.
'As a result, it is necessary to maintain an appropriately tight monetary stance in order to bring inflation back to target within an acceptable time frame,' the bank said in a statement.
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