IMF Opposes Further Lowering of Policy Rate in Iceland Skip to content

IMF Opposes Further Lowering of Policy Rate in Iceland

The permanent representative of the International Monetary Fund (IMF) in Iceland Franek Rozwadowski stated yesterday that there were not sufficient conditions to lower the policy rate of the Central Bank any more than has already been done.

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

That statement is contrary to a declaration made by the Central bank that a considerable lowering of the policy rate is being planned for June provided certain conditions are fulfilled, Morgunbladid reports.

Minister of Business Affairs Gylfi Magnússon believes that the conditions are right to lower the policy rate further and commented that the Central Bank and the IMF will doubtlessly discuss this matter amongst themselves.

“I am of the opinion that there is flexibility to lower the policy rate considering how rapidly inflation is decreasing and also for other reasons,” Magnússon told Morgunbladid.

Magnússon added that he hasn’t heard the arguments of the IMF delegation and that it is natural that the monetary policy committee of the Central Bank takes them into consideration, “But if it believes it is right to lower the policy rate then it will simply do so.”

Magnússon wouldn’t say whether he thinks it’s likely or unlikely that a considerable lowering of the policy rate will take place in June.

Morgunbladid was unable to reach Minister of Finance Steingrímur J. Sigfússon yesterday to comment on this matter, but Minister of Health Ögmundur Jónasson stated that it can simply be dangerous for the nation to maintain such a high policy rate.

Jónasson said he would discuss this matter with the cabinet. “We are not supposed to sit under some executive order if it is based on injustice and irrational thinking.”

Jónasson added that there is always reason to review the agreement with the IMF, “And I think this high policy rate is definitely an occasion to pose questions and demand answers.”

Click here to read more about the policy rate and here to read more about the agreement with the IMF.

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