The week ahead

• The Icelandic Tourist Board releases departure figures for Keflavík Airport International and the Directorate of Labour publishes registered unemployment.
• Wednesday is an interest rate decision day at the US Federal Reserve and inflation figures will be published for the US.
• Price measurements for the June Consumer Price Index will be carried out this week.

Image of the week

In most developed countries, central banks raised policy rates in response to growing inflation in the post-pandemic era. Last week, the ECB led the way with a 0.25 percentage point rate cut. As the Danish krone is tied to the euro, the Danish Central Bank lowered rates immediately following the ECB’s rate cut. Interest rate decision dates are scheduled later this month for both the FED and the Bank of England but it is considered unlikely that they will enter into a rate-cutting cycle just yet.

Highlights of the previous week

• The current account deficit was ISK 41 billion in the first quarter. The deficit more than doubled between years. There was a surplus on the services balance and deficit on the balance of goods, as is generally the rule. The surplus on services contracted between years as a result of increased import of services, mainly financial services and in research and development. The balance of goods deficit increased because of less export of marine products and aluminium. Changes to factor income and current transfers were negligible. Iceland’s net national foreign balance was ISK 1,800 bn at the end of the quarter, improving by ISK 200 bn, mainly as a result of increases on international financial markets.
• The Central Bank of Iceland (CBI) published a statement from the Financial Stability Committee (FSC). The FSC considers the domestic economy to be on a solid footing, the equity and liquidity positions of the banks is strong and defaults remain low despite high interest rates. The countercyclical capital buffer was kept unchanged at 2.5%.
• Statistics Iceland revised overnight stay figures for 2023 downward. Overnight stays in 2023 were overestimated in previously released figures, meaning that the apparent decrease this year is not as pronounced as it appeared. Following the revision, overnight stays appear to have declined by 0.5% between years in the first four months of the year and not 6.5% as previously thought.
• The ECB lowered its policy rate by 0.25 percentage points.
• The number of employed persons in the US increased by 272,000 in May and unemployment held steady at 4.0%. These labour market statistics are considered signs of higher activity than expected and the likelihood of a rate cut in September is considered to have decreased as a result. The policy rate is expected to remain unchanged into fall.
• Reginn changed its name to Heimar, Icelandair and Fly Play released load figures, Íslandsbanki announced its purchase of own shares and Alvotech finalised a debt refinancing agreement.
• Iceland Seafood, Hagar and Alma íbúðafélag issued bills. ÍL-sjóður auctioned bonds held by the fund, Government Debt Management cancelled the remaining second quarter auctions and Municipality Credit Iceland postponed an auction.

Statistics and market data

Weekly bulletin 10 June 2024 (PDF in Icelandic)