Iceland eases bank rate while Norway holds firm

ICELAND’S central bank further eased monetary policy as expected yesterday, trimming its key rate to eight per cent, and said it could be in a position to further lift capital controls.

Iceland took a beating during the crisis in 2008 and its top banks collapsed under a weight of debt. Investors fled, the crown slid and the country had to take a $10bn (£6.7bn) bailout from the IMF and Nordic states, including funds to repay depositors in failed Icelandic banks in Britain and the Netherlands.

The central bank also took borrowing costs to a record high of 18 per cent and put in place strict capital controls to protect its currency. It started to ease those restrictions late last year, but the crown is still far from fully tradable.

Norway’s central bank, meanwhile, held its main interest rate steady at two per cent and signalled no upward move after its economic recovery stuttered and Eurozone debt risks grew.

The central bank said it saw its key rate in a range of 1.5 to 2.5 per cent until October.