Iceland makes its biggest rate hike since 2008

Bloomberg

Iceland’s central bank delivered its biggest interest-rate hike since the 2008 crisis, trying to quell inflation spurred by a rampant housing market.
The Monetary Policy Committee in Reykjavik lifted the seven-day term deposit rate by 75 basis points to 2.75%, the highest level in almost two years. The increase was forecast by the nation’s two biggest banks, Landsbankinn and Islandsbanki, while market participants surveyed last week by the central bank predicted 50 basis points.
The central bank can claim to be western Europe’s most aggressively hawkish after tightening before its neighbours as early as last May, and delivering a string of rate hike since then. That effort has yet to bear fruit after inflation hit an almost decade high of 5.7% last month.
Inflation will accelerate to 5.3% in 2022, compared with previous forecast of 3.5%, the bank said. It expects price growth to slow to 3.4% next year and 2.9% in 2024, still above its 2.5%-target.
“The rise in house prices is a major factor, although other domestic cost items have risen as well. Added to these is increase in global oil
and commodity prices,” the
central bank said.