Iceland's central bank increased the key interest rates for the first time since 2008, while the bank warned from further intervention after krona losses pushed inflation to a 13-month record. Moreover, the seven-day collateral lending rate was raised by 25 BP to 4.50%, the bank said today.

Increasing the interest rates reflects the fact that the inflation outlook for the coming two years has deteriorated still further since the committee's last meeting, policy makers said in a statement. Data and the latest forecast also indicate that domestic demand and employment will grow more strongly in 2011 than was assumed in the last forecast, the bank said.