Governor says planned rent cap will hurt tenants

Iceland’s central bank governor Ásgeir Jónsson has called the government’s planned rent cap “obviously very stupid,” saying it would ultimately harm tenants, mbl.is reported.

Jónsson was responding to a question from Íslandsbanki chief economist Jón Bjarki Bentsson at a news conference on the Central Bank’s monetary policy decision. Bentsson asked whether the proposed measure could worsen the inflation outlook.

Jónsson said economists were taught that putting a ceiling on rents was not a solution. In the longer term, he said, it would reduce the supply of rental housing and lead to other effects.

He called the measure “completely the wrong response” and said tenants would suffer most. However, he said he was not sure it would have a significant short-term effect on inflation or the inflation target.