Central banks chart divergent paths as Iceland hikes rates and Indian policymakers signal tightening
Policy paths are splitting across regions; Iceland lifted its key rate to 8 per cent and Indian rate-setters pointed to potential hikes as inflation risks persist, even as South African inflation slows.
Economics & Markets··Midday
Rate hikes
Monetary authorities are taking different approaches to persistent price pressures. The central bank of Iceland increased its seven-day term deposit rate by 25 basis points to 8 per cent, marking its third hike this year. The monetary policy committee cited elevated inflation and expectations, noting that global economic uncertainty is adding to domestic price pressure. The move brings cumulative tightening since March to 75 basis points while annual inflation remains above the bank's 2.5 per cent target.[1]
Tightening signals
A similar hawkish tone emerged as Indian officials revealed expectations that headline inflation will climb from benign levels, with a projected peak of 5.9 per cent in the third quarter of the 2027 financial year. While the repo rate is currently held at 5.25 per cent, officials suggested that a case for a hike could emerge during the year if inflation risks materialise.[2]
Easing pressure
Conversely, some economies are seeing price pressures abate. South African consumer prices rose 4.3 per cent in the year to July, down from 5.0 per cent in June, recording the first slowdown in five months. The easing accompanied softer food and non-alcoholic beverage prices, smaller municipal tariff increases, and cheaper fuel, though the headline rate remains above the central bank's 3.0 per cent target.[3]
