Central Bank to Maintain Currency Restrictions Skip to content

Central Bank to Maintain Currency Restrictions

Már Gudmundsson, governor of the Central Bank of Iceland, announced yesterday that the currency restrictions that were established two years ago will not be lifted until March next year.

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Már Gudmundsson. Photo by Geir Ólafsson.

He said it is best to eliminate uncertainty surrounding the currency restrictions given that the Central Bank’s representatives have been accused of sending mixed messages, ruv.is reports.

Gudmundsson stated that statements from the Central Bank on the possible abolishing of the currency restrictions were over-interpreted earlier this autumn.

Significant fluctuations occurred in the commercial paper market because of uncertainty surrounding the issue.

Yesterday, Gudmundsson also discussed the Central Bank’s decision to lower the key interest rate to 4.6 percent on average, which has not been lower in decades, as he told RÚV. After the announcement, there was a sharp upturn in the commercial paper market.

The Central Bank predicts that unemployment will peak in early 2011 and that the employment situation will not start to improve until mid-next year, a year after economic growth resumed. The forecast is based on the experience of other nations that have gone through economic difficulties.

The bank also assumes that operations surrounding the aluminum smelter in Helguvík, southwest Iceland, will not be up to speed until 2012 and peak in 2013. At the end of 2013, the unemployment rate is expected to be around three percent, ruv.is reports.

Click here to read the governor’s statement in full and here to read more about the key interest rate.

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