The Central Bank of Iceland kept its seven-day term deposit rate at 4.5 percent on February 6th 2019, as widely expected. Although the inflation eased to 3.4 percent in January and the krona appreciated since the last monetary policy meeting in December, policymakers expect inflation to pick up this year and remain above the target of 2.5 percent until the second half of 2020. The central bank added that GDP growth is seen slowing markedly this year to 1.8 percent, about 1 percentage point less than it was projected in November, due to a contraction in tourism. Policymakers reiterated they could call for a tighter monetary stance in coming months in order to keep inflation and inflation expectations at target over the long term. Interest Rate in Iceland averaged 7.61 percent from 1998 until 2019, reaching an all time high of 18 percent in October of 2008 and a record low of 4.25 percent in February of 2011.
Interest Rate in Iceland is expected to be 4.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Interest Rate in Iceland to stand at 4.50 in 12 months time. In the long-term, the Iceland Interest Rate is projected to trend around 4.25 percent in 2020, according to our econometric models.