Statement of the Monetary Policy Committee 30 September 2015
The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to keep the Bank’s interest rates unchanged. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore remain 5.5%. The MPC has decided to increase reserve requirements from 2% to 4% as of the next reserve maintenance period, which begins on 21 October. The purpose of this is to strengthen the Bank’s liquidity management, in the wake of its substantial foreign currency purchases in the recent term and in connection with the winding-up of the failed banks’ estates and the planned auction to release or tie up offshore krónur.
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The Central Bank's Economic Indicators for September
The Central Bank's Economic Indicators for September 2015 have been posted on this website.
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Exemptions and foreign exchange transactions related to Icesave
The Icelandic Depositors’ and Investors’ Guarantee Fund (DIGF) has reached an agreement with the Dutch central bank (De Nederlandsche Bank, DNB) and the British Financial Services Compensation Scheme (FSCS), which entails that a settlement has been reached by the authorities in the three countries in connection with the Icesave deposit accounts held at Landsbanki Íslands (LBI). The photograph shows Mar Gudmundsson, Governor of the Central Bank of Iceland, and Ingibjörg Gudbjartsdottir, Director of the Bank’s Capital Control Surveillance Unit, signing the exception for the DIGF.
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The underlying external position of the economy at the end of the second quarter of 2015
The international investment position was negative by 7,665 b.kr., or 365% of GDP, at the end of the second quarter of 2015. The position excluding the deposit institutions in winding-up proceedings was positive, however, by 114 b.kr., or 5.4% of GDP. Based on the current position and the book value of assets, the winding-up of these deposit institutions is estimated to have a negative effect on the net external position in the amount of 806 b.kr., or about 38% of GDP. The underlying IIP is therefore estimated to be negative by 691 b.kr., or 33% of estimated GDP, at the end of the second quarter of 2015.
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Balance of payments and investment position
The current account balance was positive by 21.3 b.kr. during the quarter, as opposed to a positive balance of 6.3 b.kr. in the preceding quarter. The balance on goods trade was negative by 12.8 b.kr., while the balance on services trade was positive by 54.7 b.kr. The balance on primary income was negative by 16 b.kr. and secondary income by 4.7 b.kr. Foreign assets totalled 5,535 b.kr. at the end of the quarter, while foreign liabilities totalled 13,200 b.kr. Thus the net external position was negative by 7,665 b.kr., and net liabilities declined by approximately 266 b.kr. quarter-on-quarter. Excluding the financial institutions undergoing winding-up proceedings, assets totalled 3,966 b.kr. and liabilities 3,852 b.kr. The net position was therefore positive by 114 b.kr., and net assets increased by 87 b.kr. during the quarter.
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