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)
