04 October 2023

Statement of the Monetary Policy Committee 4 October 2023

The Monetary Policy Committee (MPC) of the Central Bank of Iceland has decided to keep the Bank’s interest rates unchanged. The Bank’s key interest rate – the rate on seven-day term deposits – will therefore remain 9.25%.

On the whole, economic developments have been consistent with the assessment made by the MPC at its last meeting. Inflation has risen again, measuring 8% in September. Inflation excluding housing has risen as well, but underlying inflation has tapered off slightly. There are signs that price increases are somewhat less frequent than before, and less widespread. Inflation expectations are still too high but have fallen by some measures.

GDP growth measured 5.8% in H1/2023 but was just over 7% in 2022. Economic activity has therefore lost pace, and indicators imply that growth in domestic demand has eased even further in Q3. On the other hand, the labour market and the economy as a whole remain relatively tight. The Bank’s real rate has risen in 2023 to date, however, and the impact of policy rate hikes has started to come more clearly to the fore.

At this point in time, there is some uncertainty about economic developments and about whether the current monetary stance is sufficient. The MPC has therefore decided to await further developments, as the Bank’s new macroeconomic and inflation forecast will be available at its next meeting. Near-term monetary policy will be determined by developments in economic activity, inflation, and inflation expectations.

No. 16/2023
4 October 2023

The interest rates will be as follows:

1. Overnight loans 11.0%
2. Seven-day collateralised loans 10.0%
3. Seven-day term deposits 9.25%
4. Current accounts 9.0%

See further:

Central Bank of Iceland interest rates and reserve requirements  4 October 2023