The Central Bank of Iceland publishes Monetary Bulletin and lowers interest rates
On November 6, 2002, the Central Bank of Iceland
published the November issue of Peningamál (Monetary Bulletin), including the
Bank's quarterly inflation forecast, and for the first time, a macro-economic
forecast as well. Inflation has continued to slow down over the past quarter and
the Central Bank's inflation target should be attained by the end of the year.
According to the Bank's forecast, price stability will also prevail for the next
two years.
GDP growth is expected to be sluggish next year, at 1½%, but
recovery will likely gain some momentum in 2004. A growing slack in the economy
will emerge as growth remains below potential. This and favourable external
balance should contribute to exchange rate stability as well as price stability
over the forecast period. This issue of Monetary Bulletin includes a discussion
on the problems that uncertainty concerning conceivable large scale investment
projects in hydropower and power-intensive industry pose to the conduct of
monetary policy.
On the basis of the forecasts and analysis published in
this issue of Monetary Bulletin, the Board of Governors of the Central Bank of
Iceland decided to lower the yield in the Bank's repurchase agreements with
credit institutions by 0.5 percentage points, to 6.3 percent, effective at the
next auction of repurchase agreements on November 12, 2002.
The English
translation of Peningamál, Monetary Bulletin, will appear on the Bank's website,
each chapter as soon as it becomes available. Attached is a preliminary English
translation of the Bulletin's introductory chapter.
Nr. 16/2002
November 6, 2002