The Central Bank of Iceland kept its seven-day term deposit rate at 4.5% at its March 20th 2019 meeting, as widely expected. Although the inflation eased to 3% in February and the krona appreciated since the last monetary meeting, inflation is expected to rise somewhat over most of the year, depending on the results of the ongoing wage negotiations. Policymakers noted that GDP growth slowed between the 1st half and 2nd half of 2018, and was 4.6% in 2018, above bank projections of 4.3%. Still, recent indicators of economic activity and the labour market suggest that demand pressures in the economy continue to subside. Policymakers added that long-term inflation expectations are still above target and reiterated they could call for a tighter monetary stance in coming months. Interest Rate in Iceland averaged 7.56 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 4.25 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.