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Finance Minister for Lower Interest Rates

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Finance Minister for Lower Interest Rates

Icelandic money

Photo: Geir Ólafsson.

Benedikt Jóhannesson, Iceland’s minister of finance, believes the Monetary Policy Committee of the Central Bank of Iceland ought to lower interest rates considerably this month, RÚV reports. Benedikt, who is also the leader of the Reform Party, posted an article today on the party’s website, now that 111 days have passed since the coalition government of the Independence Party, the Reform Party and Bright Future took power.

“High interest rates,” Benedikt explains, contribute to the strong rate of the króna, a rate so high that the travel industry, fishing industry and, as a matter of fact, all sectors which compete with those abroad, or sell their goods or services there, are struggling.”

Benedikt says the Central Bank has countered the strengthening of the króna by buying almost a billion ISK worth of foreign currency a day, but he believes lowering interest rates would be more effective.

“Of course I don’t give the Central Bank orders, but I can voice my opinion,” he writes. He adds that the committee ought to lower interest rates considerably in May, and if it deems the reaction of the economy too extreme, it could always raise them again next time.

Benedikt lists various ways in which the government has tried to counter the strengthening of the króna in the past 111 days: “We have lifted capital controls, paid down foreign debt, announced higher taxes on foreign tourists, encouraged pension funds to transfer funds abroad, and predicted a larger budget surplus, but almost to no avail. The interest tool has not yet been applied, and the Central Bank is in charge of that, or rather the Monetary Policy Committee. It’s up to the committee to make the next move.”

The Central Bank will make a decision regarding interest policy May 17.

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