Weekly Bulletin 7 October 2024
The Monetary Policy Committee (MPC) of the Central Bank of Iceland (CBI) lowered the policy rate last week, for the first time in four years. The CBI’s key interest rate is now 9% after having stood unchanged at 9.25% for over a year. Inflation in the eurozone remains on a downward trajectory, measuring 1.8% in September, below the 2% inflation target. Inflation figures for the US will be published this week.
7 October 2024
The week ahead
- On Thursday, the Icelandic Tourist Board publishes departures from Leifsstöð International Airport in September. We will also see inflation figures for the US and financial statements for Ölgerðin that same day.
- On Friday, the Directorate of Labour publishes figures on registered unemployment in September.
- Measurements for the October Consumer Price Index take place this week, with Statistics Iceland publishing the CPI on Wednesday 30 October.
Image of the week
The CBI announced its first policy rate cut on Wednesday last week following six “unchanged” decisions in a row. In its statement issued alongside the decision, the MPC mentioned that the scope and frequency of price increases have tapered while underlying inflation has subsided. The MPC also points to increased slack in the labour market and growing pessimism among households and corporates. The research departments of all the domestic commercial banks had forecast unchanged rates, pointing to the cancellation of public fees as the main cause of rapid decrease in inflation in the past two months - a cause that may lead to expansion in the economy moving forward. Other considerations are that payment card turnover has grown steadily in recent months and residential housing prices have risen rapidly. The MPC is likely to continue to tread cautiously but if the outlook remains positive and inflation recedes, we expect further rate cuts from the MPC going forward.
Highlights of the previous week
- As mentioned above, the CBI lowered the key interest rate by 0.25 percentage points last week.
- Inflation continued to recede in the eurozone in September and measured 1.8%. This puts inflation below the 2% target for the first time in three years and expectations are for yet another rate cut on 17 October.
- Around 254,000 new jobs were created in the US in September and unemployment receded from 4.3% to 4.1%. This was a stronger showing from the labour market than generally expected and increases the likelihood that the Federal Reserve will take more cautious steps in its rate-cutting cycle in November.
- Íslandsbanki concluded an offering of covered bonds. Landsbankinn issued EUR-denominated green bonds. Arion Bank issued green bonds in NOK and SEK and sold covered bonds along with an exchange offer. Government Debt Management issued Treasury bonds and published its quarterly prospect.
Statistics and market data
Disclaimer
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