Iceland’s central bank cuts rates to 7%

Iceland’s Central Bank (Sedlabanki Islands) has cut its key interest rate from 8% to 7%.

While a cut was expected, it was not as much as economists had forecast after inflation eased and the country’s currency, the krona, strengthened.

The central bank has aggressively cut interest rates after they hit a record high of 18% in October 2008 – at the height of the financial crisis.

Iceland was severely hit by the financial crisis and it led to three of its largest banks (Glitnir, Landsbanki and Kaupthing) having to be nationalised at the height of the crisis.

This led the Iceland Government to seek billions of dollars worth of aid from the International Monetary Fund, as well as a loan from the European Union to help it survive the financial turmoil.