In a statement released this morning, the Monetary Policy Committee (MPC) of the Central Bank of Iceland announced that it has decided to lower the Bank’s interest rates by 0.5%. The Bank’s key interest rate – the rate on seven-day term deposits – will, therefore, be 2.25%.
The Committee also announced its decision to lower deposit institutions’ average reserve requirement from 1% to 0%.
“The fixed reserve requirement will remain unchanged at 1%. The reduction in the average reserve requirement and changes in the treatment of the fixed reserve requirement in liquidity rules will ease the banks’ liquidity position and give them greater scope to respond to changed conditions in the domestic economy.”
With its actions, the Central Bank hopes to “ease the monetary stance” given the worsening economic outlook following the accelerated spread of the COVID-19 virus. The Committee will continue to monitor economic developments and will use “the tools at its disposal to support the domestic economy.”
Speaking at a press conference this morning, Governor of the Central Bank Ásgeir Jónsson announced that the Bank would hold additional meetings in the coming days if required.