Iceland Cuts Key Rate to 7.25% in Surprise as Growth Slows

Iceland’s central bank unexpectedly cut borrowing costs to the lowest level in more than two years as officials signaled reduced concerns over inflation in the Atlantic nation while the economy is contracting.

Policymakers at Sedlabanki were unanimous in the decision to lower the 7-day term deposit rate a quarter of a percentage point to 7.25% on Wednesday. Market participants had projected no change in a survey published by the central bank last week.