The Federation of Icelandic Industries (Samtök iðnaðarins, also known as SI) is calling on the Central Bank’s Monetary Policy Committee to leave interest rates unchanged. As stated by SI, the economy is already under significant pressure, and further developments could affect the inflation outlook.
The Monetary Policy Committee (MPC) will announce the decision on rates on 19 August.
What’s the Story?
Original source: Vísir
- The Central Bank’s key rate is currently 7.75 per cent.
- Inflation rose to 5.3 per cent in July.
- The Monetary Policy Committee will announce its next rate decision on 19 August.
Calls for Coordinated Action
The Central Bank’s key interest rate currently stands at 7.75 per cent after two increases this year.
Inflation reached 5.3 per cent in July 2026, up 0.1 percentage points from the previous month, and major analysts, including Íslandsbanki, have forecast a further 0.25 percentage-point increase.
Sigurður Hannesson, director of SI, said three factors weighed most heavily in favour of holding rates.
“First, the restraint is already considerable, and the economy is cooling,” he said, pointing to weak expectations among both consumers and business leaders.
Hannesson also warned that another increase could work against the goals of monetary policy, noting that payment defaults in the construction industry have risen sharply this year, putting pressure on investment.
Finally, he pointed to three developments expected soon: a review of collective wage agreements, the government’s budget bill due on 8 September, and a referendum later this month.
The industry group believes clear and credible forward guidance would be more appropriate than another rate rise.
Hannesson said the current situation requires broad coordination among those responsible for economic policy, with greater competitiveness and stronger control of conditions among the main priorities.
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