PrintIceland's Central Bank Cuts Key Interest Rate by 25bps to 7.25% as Sees Weaker GDP Growth, Lower Inflation
BY MT Newswires | ECONOMIC | 11/19/25 09:24 AM EST09:24 AM EST, 11/19/2025 (MT Newswires) -- The Central Bank of Iceland Wednesday said its Monetary Policy Committee (MPC) decided to lower interest rates by 25 basis points, with the key interest rate -- the rate on seven-day term deposits -- falling to 7.25%.
All MPC members voted in favour of the decision, noted the policy statement.
"Growth in domestic demand has slowed in line with a tight monetary stance, and signs of a turning point in economic activity are growing ever clearer," stated the central bank. "According to the Bank's newly published forecast, the positive output gap appears to have closed, and GDP growth looks set to slow more than previously projected."
The central bank forecasts that inflation will subside more rapidly than previously assumed, although pay rises are still sizeable and inflation expectations continue to measure above target.
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