FX.co ★ Central Bank of Iceland Keeps Key Rate Unchanged

The Monetary Policy Committee (MPC) of Iceland's Central Bank decided to keep its key policy rate unchanged at 7.25% during its meeting in February 2026, sustaining the lowest rate since February 2023. This decision follows a 25 basis points reduction in November 2025, and reflects the current economic conditions where GDP growth is anticipated to remain modest, with the long-term inflation outlook largely stable. Despite a slowdown in economic activity and indications of a cooling labor market, fundamental inflationary pressures persist. In January 2026, the annual inflation rate rose to 5.2%, up from 4.5% in December, representing the highest figure since September 2024. The Central Bank indicated that any future rate reductions would depend on definitive evidence showing inflation aligning with its 2.5% target. Additionally, policymakers noted that short-term monetary policy would be continuously informed by changing trends in economic activity, inflation, and inflation expectations.