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.
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