About the Bank

The principal objective of the Central Bank of Iceland is to promote price stability. In addition, the Central Bank of Iceland shall undertake such tasks as are consistent with its role as a central bank, such as maintaining foreign exchange reserves and promoting a sound and efficient financial system, including domestic and cross-border payment systems. The Central Bank of Iceland has the sole right to issue banknotes and to mint and issue coin or other currency that could circulate in place of banknotes or lawful coin.

Central Bank of Iceland

The principal objective of the Central Bank of Iceland is to promote price stability and financial stability. By agreement with the Minister, the Bank is authorised to declare a numerical inflation target. The Act on the Central Bank of Iceland, no. 36/2001, provides the Bank full independence in the conduct of monetary policy so as to achieve the inflation target, which is defined as a 2½% increase in the price of goods and services over a twelve-month period. 

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International collaboration

The Central Bank collaborates in a number of ways with a large number of foreign financial institutions, including other central banks, not least in the Nordic region. It also engages in regular cooperation with the European Central Bank and the Organisation for Economic Co-operation and Development (OECD) and is a shareholder in the Bank for International Settlements (BIS) in Basel, Switzerland. The Central Bank represents Iceland at the International Monetary Fund (IMF). 

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Government debt management

The Central Bank of Iceland oversees Treasury foreign borrowing and conducts domestic auctions, buybacks, and Treasury bond redemptions. It also executes primary dealer agreements and oversees securities lending to primary dealers in accordance with an agreement made with the Ministry of Finance and Economic Affairs on 18 October 2010. 

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Foreign exchange reserves

The Central Bank of Iceland is required by law to invest the foreign exchange reserves. The Central Bank’s foreign exchange reserves enable it to achieve its goals and fulfil its duties. The reserves mitigate the effects of external risks related to changes in access to credit and fluctuations in capital flows to and from Iceland. They enable the Bank to help the Treasury meet its need for foreign currency. 

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