By law, decisions on the application of the Central Bank's monetary policy instruments are taken by the Monetary Policy Committee; cf. the Act on the Central Bank of Iceland, No. 92/2019. These monetary policy instruments are its interest rate decisions, transactions with credit institutions other than loans of last resort, decisions on reserve requirements, and securities and foreign exchange market transactions aimed at achieving price stability.
Current members of the Monetary Policy Committee are Ásgeir Jónsson (chair), Thórarinn G. Pétursson (vice-chair), Tómas Brynjólfsson, Herdís Steingrímsdóttir, and Ásgerdur Ósk Pétursdóttir.
Monetary Policy Strategy
The MPC sets the Monetary Policy Strategy. The strategy provides a comprehensive framework within which monetary policy decisions are taken and communicated to the public.
Decisions on the monetary policy instruments and publication of minutes
The Monetary Policy Committee (MPC) is required to meet at least six times a year, publish the minutes of its meetings, and explain its decisions and the rationale behind them. Each monetary policy decision is published in a statement released by the Committee before the market opens on the day the decision is announced. The MPC publishes the minutes of its meetings two weeks after the announcement of each interest rate decision. Included in the minutes is the Committee’s assessment of economic and monetary developments and prospects, as well as the rationale for members’ votes. Further information can be found in the Monetary Policy Committee Rules of Procedure, which are endorsed by the Central Bank of Iceland Supervisory Board.
Reports to the Government on inflation
According to the joint declaration on the inflation target by the Central Bank of Iceland and the Government of Iceland, the Central Bank must submit a report to the Government if inflation falls below 1% or rises above 4%. These deviation limits do not entail any other formal requirements vis-à-vis the Central Bank. The report must explain the reasons for the deviation, how the Bank intends to respond, and how long the Bank anticipates that it will take to bring inflation back to the target.
Reports to the Government
Meetings with Parliamentary committees and related reports
The Central Bank of Iceland is entrusted with considerable power to take decisions that directly affect the lives of people in Iceland. This has necessitated both that the Bank be subject to increased oversight and that it fulfils stricter transparency requirements in its activities. An element in this is that the Central Bank Monetary Policy Committee reports to Parliament on its activities twice a year and describes them more fully in meetings with Parliamentary committees. Since 2019, external members of the Monetary Policy Committee have also had the opportunity to submit annually a separate report to Parliament.