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On Wednesday, the Icelandic central bank decided to raise the key rate by 0.25 point to 4.5%.
The increase in interest rates is the first since November 2015, illustrating the country's economic recovery after the bankruptcy of Lehman Brothers investment bank and the 2008 financial crisis.
The Icelandic financial sector has almost completely collapsed after the collapse of the country's three largest banks, which had assets ten times greater than their GDP. They became the first Western country since the United Kingdom in 1976 to receive a "bailout" from the International Monetary Fund.
However, ten years after the financial crisis, the situation is completely different.
Although the central bank expects a slight slowdown in growth in the second half of the year, Iceland's economic growth rate is 4.4% in 2018. This is almost one percentage point higher than expected in August.
"We are now waiting for inflation to continue to rise and fall somewhat compared to the inflation target for next year," writes the central bank.
In October, inflation in Iceland was 2.8%. The country's inflation target is 2.25% and the central bank is ready to tighten its efforts even further.
(© NTB)
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