Home Central Banks Fishy Fears Lead Iceland to Cut Again

Fishy Fears Lead Iceland to Cut Again

Stockholm (Ekonamik) – At this week’s meeting of the Central Bank of Iceland (CBI) the Monetary Policy Committee (MPC) decided to cut interest rates by 25bps to 3.25%. This is the third rate cut decision by the CBI in 2019.

Motivations of the CBI

As noted in September, the Icelandic rate cuts this year have been driven by two main factors. On the domestic front, a collapse of Capelin (Mallotus villosus) fish stocks in Icelandic waters, hurt the fishing sector extensively. This was then further exacerbated by a contraction in international trade.

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The general trend for the Icelandic economy continued to point downwards, but there was some respite for the CBI. “According to preliminary national accounts figures, output growth continued to ease in H1/2019, even though it was somewhat stronger than was forecast in the August Monetary Bulletin,” the CBI’s October statement explained. “This relatively stronger growth is due mainly to a more favourable contribution of net trade, as demand has shifted towards domestic production, partially offsetting the contraction in exports. Leading indicators imply that economic activity will continue to slow, although there are signs that the economy may be regaining a foothold.”

Other Central Bank Meetings

Among other central banks meeting this week, the ones in Angola, Jamaica, Poland and Romania left their rates unchanged, while the ones in Australia and India lowered their rates, to 0.75% and 5.15% respectively.

Image courtesy of the Central Bank of Iceland

Filipe Wallin Albuquerque
Filipe Wallin Albuquerque
Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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