Iceland's central bank lowered its rates by 0.5 percentage points today, bringing its benchmark interest rate to 8%, hinting that the crisis-hit economy was showing signs of recovery.
The bank had also lowered its rates by half a percentage point last month.
It said that inflation was slowing and the Icelandic krona, which had plummeted following the country's banking collapse in late 2008, was starting to appreciate again.
The Sedlabanki said today that since its last meeting, Iceland's currency had appreciated by 5% in trade-weighted terms and by 6% against the euro, which was 'slightly more' than in its May forecast.
'If the krona remains stable or appreciates, and if inflation develops as forecast, there should be some scope for continued gradual monetary easing,' the bank said.
At the height of Iceland's deep financial crisis in late 2008, the bank had raised its main interest rate to 18%. It has since then progressively lowered rates in an attempt to stimulate growth in the island country's battered economy.
