Confederation of Icelandic Employers worries about economy Skip to content

Confederation of Icelandic Employers worries about economy

The management board of the Confederation of Icelandic Employers (SA) met with Prime Minister Geir H. Haarde and Foreign Minister Ingibjörg Sólrún Gísladóttir this week to urge them to work on Iceland’s economic problems.

According to a statement from SA, the Central Bank has taken actions which have harmed the economy in Iceland without providing any benefits and SA predicted the Central Bank would not be able to lower the policy rate in the near future.

The statement said the country’s economic management should be aimed at creating prerequisites for lowering inflation, like reducing public expenditure and lowering the amounts of loans granted by the Housing Financing Fund (FHH).

SA suggested that the government should give the Central Bank a clear message about not working against the credibility of the economic policy and against expectations of a lower inflation, which, according to SA, would help the Central Bank solving the dilemma of a high policy rate.

Once the policy rate has been lowered, there is hope the Icelandic króna would become lower and more stable than it currently is. According to the statement by the SA, this would coincide better with the strength of the economy and foreign trade.

Director of the Central Bank Davíd Oddsson criticized SA’s statement. Oddson told Morgunbladid the bank’s current policy rate has already begun to deliver results and that inflation is decreasing.

The inflation in Iceland is currently 4.7 percent, while it is between one and two percent in most European countries. The Central Bank aims at decreasing the inflation to 2.5 percent by the third quarter of this year.

Click here to read about the Central Bank’s policy rate.

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