The central bank of Iceland has cut its interest rate to 17%.
The reduction is the first since Iceland reached a agreement over a financial aid package worth $US10 billion with the International Monetary Fund.
The Sedlabanki cut rates by one percentage point from 18%.
Iceland's financial system collapsed in October under the weight of debt, leading to a currency crisis, rising unemployment and public protests.
The economy is forecast to shrink by almost 10% this year.
The currency, the krona, has stabilised since the October meltdown.
The central bank raised rates by six percentage points in October to the record high of 18%.
