REYKJAVIK, Iceland—Iceland's central bank cut its key interest rate by half a point to 9 percent Wednesday.
It also cut the current account rate half a point to 7.5 percent.
The seven-day collateral lending rate peaked at 18 percent in October 2008, when Iceland's banking system collapsed under the strain of a global credit crisis.
"If the krona remains stable or appreciates, and if inflation develops as forecast, there should be scope for continued gradual monetary easing," according to a statement from the Monetary Policy Committee of Sedlabanki, the central bank.
"However, as long as there is significant uncertainty about Iceland's future access to international capital markets, the MPC will have limited room for maneuver."
Iceland is still trying to negotiate a settlement with Britain and the Netherlands for compensating savers who lost more than $5 billion in the collapse of Icesave, an Iceland-based Internet bank.
Earlier this month, 93 percent of voters in a referendum rejected an earlier agreement with the British and Dutch governments.
Failure to settle the dispute could have repercussions for Iceland's economic recovery. The International Monetary Fund has agreed to loan Iceland $4.6 billion, and the agreement is linked to repaying its international debts.
There also have been fears that Britain and the Netherlands would block Iceland's application to join the European Union until an Icesave deal is signed into law.
