Reykjavik  - The central bank of Iceland Thursday kept the country's key interest rate at 15.5 per cent, citing that it was "likely that inflation is near its peak."

The central bank raised the interest rate to its current level in April.

The August inflation rate was 14.5 per cent, well above the bank's inflation target of 2.5 per cent, although it is allowed to deviate by 1.5 percentage points in either direction.

While the inflation rate might be peaking and the economy was likely to contract, the central bank argued for continued tight monetary control.

Reykjavik - A boat filled with tourists heading for a whale- watching tour has disrupted the operations of a whaling ship off the coast of Iceland in the second incident of its kind this summer, it was reported Thursday.

The RUV radio broadcaster in Reykjavik said that the whale watching boat Edling 2 approached the whaling ship Njordur KO7 so closely offshore from the port city of Hafnarfjordur that the ship's crew was forced to abandon their hunt for minke whales.

Operators of whale watching tours are determined to whaling off of Iceland banned. Earlier this year, Iceland Fisheries Minister Einar F. Gudfinnsson approved the killing of 40 minke whales.

Reykjavik - In the second case of its kind in two weeks, a polar bear was sighted in northern Iceland after apparently making a journey of several hundred kilometres atop an ice floe from Greenland

Reykjavik/Stockholm - I