11 March 2020

Statement of the Monetary Policy Committee 11 March 2020

The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to lower the Bank’s interest rates by 0.50 percentage points. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore be 2.25%.

Furthermore, the Committee has decided to lower deposit institutions’ average reserve requirement from 1% to 0%. The fixed reserve requirement will remain unchanged at 1%. The reduction in the average reserve requirement and changes in the treatment of the fixed reserve requirement in liquidity rules will ease the banks’ liquidity position and give them greater scope to respond to changed conditions in the domestic economy.

With these actions, the Bank is easing the monetary stance in view of the worsening economic outlook following the accelerated spread of the COVID-19 virus.

The MPC will continue to monitor economic developments and will use the tools at its disposal to support the domestic economy.

No. 6/2020
11 March 2020

For further information, see the Central Bank memorandum on reserve requirements

The interest rates will be as follows:

1. Overnight loans 4.00%
2. Seven-day collateralised loans 3.00%
3. Seven-day term deposits 2.25%
4. Current accounts 2.00%
5. Minimum required reserves, fixed requirement 0.00%

See: Central Bank of Iceland interest rates and reserve requirements. Interest rates effective as of 11 March 2020. Reserve ratios effective as of 21 March 2020.