Bloomberg News

Iceland March Inflation Rate Falls as Krona Gains Momentum

March 26, 2013

Iceland’s annual inflation rate fell this month after currency interventions boosted the krona, easing the pressure on Sedlabanki to raise interest rates.

Inflation slowed to an annual 3.9 percent in March from 4.8 percent the prior month, Reykjavik-based Statistics Iceland said today on its website. Consumer prices rose 0.2 percent in the month, the agency said.

The central bank this month kept its benchmark rate at 6 percent as policy makers try to support the krona while they scale back currency restrictions. The bank, which targets 2.5 percent inflation, forecasts that consumer prices will average 3.6 this year and slow to 2.7 percent in 2014.

The krona has risen 8.6 percent against the euro since Jan. 30 after the central bank started buying the currency last month. A stronger currency reduced import costs.

Iceland imposed currency restrictions in 2008 following the failure of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf after the krona sank 80 percent against the euro offshore. Arion Bank hf, the state-created successor to Kaupthing, has estimated the controls are stopping as much as $8 billion in offshore krona assets from being sold.

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net.


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