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CB IS

Minutes of the Monetary Policy Committee meeting of 23-24 August 2021

In accordance with the Monetary Policy Committee Rules of Procedure, the minutes of the Committee's most recent meeting have been published on the Bank's website. The minutes are published two weeks after the announcement of the Committee‘s decision. Accordingly, we have now published the minutes from the meeting of 23-24 August 2021, during which the Committee discussed economic and financial market developments and decisions on the application of the Bank’s monetary policy instruments. The minutes can be found here: Minutes of the Central Bank of Iceland Monetary Policy Committee meeting 23-24 August 2021 (103rd meeting). Published 8 September 2021. Older MPC minutes...

Working Paper no. 87: Wages and prices of foreign goods in the inflationary process in Iceland

Central Bank of Iceland has published a research paper by Ásgeir Daníelsson, economist in the bank‘s Economics and Monetary Policy Department. The paper discusses econometric methods for estimation of equations to forecast inflation in Iceland. Reasons why estimates of the influence of changes in wages are frequently insignificant are explained, and it is shown that in such circumstances it makes sense to use that CPI, unit labour cost, and the price of foreign goods in ISK are cointegrated to forecast inflation. It is shown how large volatility in changes in wage rates, and especially large volatility in changes in the...

Current account deficit 31.1 b.kr. in Q2/2021 – net IIP positive by 36.6% of GDP

Iceland’s current account showed a deficit of 31.1 b.kr. in Q2/2021. This represents a deterioration of 8.3 b.kr. relative to the previous quarter and 24.8 b.kr. relative to Q2/2020. The deficit on goods trade totalled 55.7 b.kr., while the surplus on services trade totalled 25.2 b.kr. At the end of the quarter, the net international investment position was positive by 1,120 b.kr., or 36.6% of GDP, and improved by 79 b.kr., or 2.6% of GDP, during the quarter. See here press release no 21/2021: Current account deficit 31.1 b.kr. in Q2/2021 – net IIP positive by 36.6% of GDP This news item was...

IMF general allocation expands Iceland’s international reserves

The International Monetary Fund (IMF) allocated special drawing rights (SDR) to its member countries on 23 August 2021, following prior approval by the Fund’s Board of Governors on 2 August. The Governor of the Central Bank of Iceland is a member of the Board of Governors. The general allocation, equivalent to a total of 650 billion US dollars, is distributed to member countries in direct proportion to their quota with the Fund. The quota reflects the countries’ share in the global economy and creates the foundation for the Fund’s lending capacity, as well as determining each country’s voting rights...

Minutes of the Financial Stability Committee 28 – 29 June

The minutes of the Financial Stability Committee meeting 28 - 29 June 2021 has been published. Committee members discussed financial stability developments and prospects, the economic situation, developments in the domestic financial markets, the position of and risk in the financial system and in the operations of individual financial institutions, default, the real estate market, stress tests, systemically important financial institutions, the financial cycle, the new Foreign Exchange Act, the Countercyclical capital buffer and restrictions on consumer mortages. See the minutes here: Minutes of the Financial Stability Committee meeting, 28 - 29 June 2021 (8th meeting). Published 27 July 2021. See...

Statement of the Monetary Policy Committee 25 August 2021

The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to raise the Bank’s interest rates by 0.25 percentage points. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore be 1.25%. The economic outlook has improved since the Bank’s last forecast. According to the new macroeconomic forecast, published in the August Monetary Bulletin, the outlook is for GDP growth to measure 4% this year, some 0.9 percentage points above the May forecast. The improvement is driven mainly by tourist arrivals, which have increased more rapidly this summer than was previously expected....

August Monetary Bulletin published

The August issue of Monetary Bulletin has been published on the Central Bank of Iceland website. The report is also issued in Icelandic under the title Peningamál. The August issue of Monetary Bulletin can be found here: Monetary Bulletin 2021/3. Previous issues of Monetary Bulletin and other Central Bank reports can be found here. This news item was originally published by the Central Bank of Iceland (CB IS). For more information, please see the Source Link.

Minutes of the Monetary Stability Committee 28 – 29 June

The minutes of the Financial Stability Committee meeting 28 - 29 June 2021 has been published. Committee members discussed financial stability developments and prospects, the economic situation, developments in the domestic financial markets, the position of and risk in the financial system and in the operations of individual financial institutions, default, the real estate market, stress tests, systemically important financial institutions, the financial cycle, the new Foreign Exchange Act, the Countercyclical capital buffer and restricions on consumer mortages. See the minutes here: Minutes of the Financial Stability Committee meeting, 28 - 29 June 2021 (8th meeting). Published 27 July 2021. See...

New Foreign Exchange Act and new Rules on Derivatives Trading

Parliament has recently passed a new Foreign Exchange Act, no. 70/2021, the bill of legislation for which was introduced this past February. The bill was prepared by a work group appointed by the Minister of Finance and Economic Affairs in September 2019. The group’s task was to conduct a comprehensive review of the regulatory framework for foreign exchange matters in Iceland, particularly the Foreign Exchange Act, the Act on the Treatment of Króna-Denominated Assets Subject to Special Restrictions (also called the Offshore Króna Act), and rules set on the basis of these acts. The new law entered into force...

Statement of the Financial Supervision Committee 30 June 2021

According to the Financial Supervision Committee’s statement of 13 January 2021, significant uncertainty about near-term economic developments lay ahead, and the Committee emphasised that financial institutions should demonstrate the utmost caution as regards their capital position. Financial institutions were instructed to have certain points as guideposts when deciding on dividend payments or share buybacks. Those instructions remain in effect through 30 September 2021. Furthermore, insurance companies were urged to observe the utmost caution in managing their equity, in view of the uncertainty. It now appears that the COVID-19 pandemic will affect financial institutions less than was feared at the beginning...

Statement of the Financial Stability Committee 30 June 2021

Accommodative monetary and macroprudential policies and measures taken by the Government have supported households and businesses during the pandemic. In recent months, there have been signs of a strong economic recovery, and asset prices have risen materially. The three large banks are in a strong position, their capital and liquidity are well above regulatory minimal, and they have ready access to liquidity in both krónur and foreign currencies. As a result, they are highly resilient. At its meeting, the Financial Stability Committee (FSN) decided to set special rules on derivatives trading on the basis of the new Foreign Exchange Act. The...

Rules on Credit Institutions’ Minimum Net Stable Funding Ratio

The Central Bank of Iceland’s Rules on Credit Institutions’ Minimum Net Stable Funding Ratio, no. 750/2021, took effect today. The Rules introduce a 100% overall stable funding ratio. At the same time, the Rules on Funding Ratios in Foreign Currencies, no. 1032/2014, were repealed. With amendments to the Regulation on Prudential Requirements for Credit Institutions, no. 233/2017, contained in Rules no. 749/2021, which also took effect today, Regulation (EU) 2019/876 of the European Parliament and of the Council (CRR II) has been implemented. Among other things, CRR II introduces binding minimum net stable funding ratios for credit institutions. In accordance...

Regulator Information

Regulator Name: Central Bank of Iceland
Abbreviation: CB IS
Jurisdiction: Iceland

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