Iceland's central bank hiked its key interest rate for the first time in over a year and raised its growth forecast for this year.
The Monetary Policy Committee decided to raise the key interest rate, which is the rate on seven-day term deposits, by 25 basis points to 4.5 percent, the Sedlabanki said on Wednesday.
"Higher inflation and inflation expectations in recent months have lowered the Central Bank's real rate more than is desirable in view of current economic developments and prospects," the bank said.
"As a result, it is necessary to raise the Bank's key rate now."
The previous change in the rate was a quarter-point reduction in October 2017.
The bank forecast 4.4 percent economic growth for this year, which was nearly a percentage point more than its prediction in August.
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