Central Bank: Policy Rate Decision Not Made by IMF Skip to content

Central Bank: Policy Rate Decision Not Made by IMF

The representatives of the Central Bank of Iceland deny that the International Monetary Fund (IMF) had anything to do with their decision to reduce the policy rate by one percent, from 13 to 12 percent, yesterday. Both the government and the employment market were disappointed with the decision.

The Central Bank of Iceland. Copyright: Icelandic Photo Agency.

Prime Minister Jóhanna Sigurdardóttir said she was disappointed that the Central Bank monetary policy committee had not lowered the policy rate by more than one percent—in May the policy rate was reduced by 2.5 percent and a larger step in that direction had been called for this month, Fréttabladid reports.

However, the IMF delegation in Iceland has declared itself against further reduction of the policy rate. The Central Bank argues that while a strategy on the arrangement of state finances is not at hand, it is impossible to lower the policy rate even further.

Sigurdardóttir stated that the committee was well aware of the various actions the government is planning to undertake in state finances and that there is no reason for its members to believe that the government will fail to execute these plans.

Vilhjálmur Egilsson, managing director of the Confederation of Icelandic Employers (SA), said that by making this decision, the Central Bank has destroyed the basis for salary increases and that the current wage contract negotiations are back to square one.

Egilsson and Gylfi Arnbjörnsson, president of the Icelandic Confederation of Labor (ASÍ), declared in a joint statement to Morgunbladid that the Central Bank seemed not to care at all about how matters developed in the employment market.

Click here to read more about yesterday’s policy rate decision and here to read more about the development of the talks between SA and ASÍ.

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