COPENHAGEN: Iceland's central bank on Wednesday kept its deposit rate unchanged at 4.50 percent and said it will intervene in the foreign exchange market if the planned release of offshore crown assets weakens the currency.
Plans were announced last week to release the last of offshore crown assets that were locked in by capital controls in the aftermath of the financial crisis.
The Finance Ministry proposed to expand authorisations for withdrawals from accounts that are subject to restrictions that were put in place when the capital controls began to be lifted in 2016.
"The resolution of such a legacy problem should not be allowed to lower the exchange rate of the crown; therefore, the Central Bank will intervene in the foreign exchange market," the central bank said.
"In this context, the Bank will also take into consideration that there are signs that the recent currency depreciation has pushed the real exchange rate below its equilibrium value."
The crown has weakened over the last seven months so that a US dollar now costs 123 crowns from below 100 crowns in April.
The central bank raised the rate a month ago from 4.25 percent, its first rate move in more than a year.
"If inflation expectations continue to rise and remain persistently at a level above the target, it will call for a tighter monetary stance," the central bank said on Wednesday.
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