ASÍ president condemns Central Bank’s 8% rate hike

Finnbjörn A. Hermannsson, president of ASÍ, has called the Central Bank of Iceland’s decision to raise its key interest rate to 8% “complete recklessness”, mbl.is reported on Wednesday. He said he would have preferred rates to remain unchanged.

The bank’s Monetary Policy Committee raised the key rate by 0.25 percentage points. The main rate, which applies to seven-day term deposits, is now 8%.

Four committee members supported the increase, while one voted to keep rates unchanged. Finnbjörn said the decision came at a difficult time, as responses are being considered to a likely change in the assumptions underpinning collective wage agreements.

He said the increase ran counter to the goals of the 2024 collective agreements, which aimed to bring down both inflation and interest rates. ASÍ will continue trying to reach an agreement with the government and the Confederation of Icelandic Enterprise on how to respond to the situation, he said.