11 November 2005

Amendment to the joint declaration of the Government of Iceland and Central Bank of Iceland from March 27, 2001

The Prime Minister of Iceland and Board of Governors of the Central Bank of Iceland today signed an agreement on an amendment to the wording of item 11 in their joint declaration on an inflation target and a change in the exchange rate policy from March 27, 2001. This now reads as follows:

11. The Central Bank shall publish inflation forecasts, projecting inflation at least two years into the future. Forecasts shall be published in the Bank’s Monetary Bulletin. This shall also contain the Bank’s assessment of the main uncertainties pertaining to the inflation forecast. The Bank shall also publish its assessment of the current economic situation and outlook.

In other respects the declaration from March 27, 2001 is unchanged. It was inter alia published in Monetary Bulletin 2001/2.

As of 2006, the Central Bank plans to publish three editions of Monetary Bulletin a year, instead of four.

Each edition will contain an inflation and macroeconomic forecast. Inflation-targeting central banks do not all publish inflation forecasts at the same frequency. A quarterly frequency is most common but some publish three, such as Norges Bank of Norway. Sophisticated inflation and macroeconomic forecasts require an enormous amount of work, and one consequence of producing four forecasts a year is that this leaves insufficient scope for important research to support them. In the Central Bank of Iceland’s view, publication of three editions of Monetary Bulletin together with other regular reporting fulfils requirements for dissemination of information about its assessment of economic and monetary developments and prospects.
The Board of Governors has also agreed to adopt a formal calendar for its interest rate decisions in 2006. This will include the publication dates for Monetary Bulletin. On the other dates, the Central Bank will issue a press release containing the Board of Governors’ decision and their rationale for it.

These changes will be described in more detail in Monetary Bulletin 2005/4, which will be published on Friday, December 2, 2005.

For further information, contact Davíð Oddsson, Chairman of the Board of Governors of the Central Bank of Iceland, tel. +354 569-9600.


No. 35/2005
November 11, 2005