Iceland makes fifth rate cut this year

"The autumn surge in COVID-19 cases and the tightened public health measures have weakened the economic rebound that began in Q3, following a historically large contraction in Q2," the bank said in a statement. The new forecast is a deterioration compared to its May-forecast of 8%, which the central bank said would be the biggest contraction in a century.

Iceland's central bank on Wednesday cut its key interest rate for the fifth time this year and said it expected the economy to contract by as much as 8.5% in 2020, it's worst forecast yet.

The central bank cut its key seven-day deposit rate to 0.75%, down from a previous 1.00%. "The autumn surge in COVID-19 cases and the tightened public health measures have weakened the economic rebound that began in Q3, following a historically large contraction in Q2," the bank said in a statement. The new forecast is a deterioration compared to its May-forecast of 8%, which the central bank said would be the biggest contraction in a century.