Iceland central bank lowered its benchmark rate for the fourth consecutive meeting on Wednesday, but policymakers stressed on the need for caution in future as inflationary pressures remain, and in view of the heighted global economic uncertainty.

The Monetary Policy Committee of the Central Bank of Iceland, led by Governor Asgeir Jonsson, unanimously reduced the seven-day term deposit rate by 25 basis points to 7.75 percent.

"Although inflation has eased and inflation expectations have fallen in the recent term, inflation pressures remain, which calls for a continued tight monetary stance and caution regarding decisions going forward," the Reykjavik-based central bank said. "This is compounded by significant global economic uncertainty."

The bank had reduced the rate by 50 basis points each in February and November and 25 basis points in October.

Inflation softened to a four-year low of 4.2 percent in February. Policymakers said the outlook is for continued disinflation in coming months.

In line with a tight monetary stance, demand growth subsided, and housing market activity slowed. However, households ramped up their consumption spending and wage costs continued to increase steeply.

"As before, near-term monetary policy formulation will be determined by developments in economic activity, inflation, and inflation expectations," the bank said.

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