The Central Bank of Iceland announced yesterday that it is lowering interests rates by 0.50 percentage points in response to the economic impact of the COVID-19 pandemic.

The bank issued the following statement:

“The Financial Stability Committee and the Monetary Policy Committee of the Central Bank of Iceland have held meetings this week.

The spread of the COVID-19 pandemic and measures adopted both in Iceland and abroad in an attempt to slow the spread of the virus have a negative impact on the economic outlook and financial conditions.

The Committees have considered the mitigating measures that they could take in response to this situation. The domestic economy and financial system are both well prepared to face shocks, and the Committees are prepared to use the policy instruments at their disposal in order to mitigate the adverse impact of this shock.

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 1.75%.

See here further the statement of the Monetary Policy Committee 18. March 2020.

The Financial Stability Committee of the Central Bank of Iceland has decided to reduce the countercyclical capital buffer on financial institutions from 2% to 0%.

See here further the statement of the Financial Stability Commitee 18 March 2020.”