The Central Bank of Iceland lowered its seven-day term deposit rate by 25bps to an all-time low of 3.75% on June 26th 2019, following a 50bps cut in the previous month, saying inflation expectations have fallen. In June, inflation rate dropped to 3.3 percent from a five-month high of 3.6 percent in May, and in line with the Central Bank’s forecast. Policymakers kept the economic outlook from the previous MPC meeting, at which GDP was projected to shrink by 0.4 percent in 2019 and inflation to return to the target of 2 percent by mid-2020 but the contraction in tourism is expected to be deeper than previously expected. Interest Rate in Iceland averaged 7.52 percent from 1998 until 2019, reaching an all time high of 18 percent in October of 2008 and a record low of 3.75 percent in June of 2019.
Interest Rate in Iceland is expected to be 3.75 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 3.50 in 12 months time. In the long-term, the Iceland Interest Rate is projected to trend around 4.00 percent in 2020, according to our econometric models.