COVID-19: interest rates cut and new rules from Monday
The Central Bank of Iceland has this morning cut interest rates to their lowest ever. The national treasury is expected to be 200 billion krónur down this year. The Icelandair cabin crew pay dispute has intensified. There was one new COVID-19 diagnosis yesterday. And more in today’s round-up.
- Public testing by deCODE genetics uncovered one new case of COVID-19 yesterday, bringing Iceland’s number of active cases back up to four. It was the first new case in a week.
- The Central Bank of Iceland this morning announced a further 0.75 percent interest rate cut, putting the Bank’s key rate at one percent; its lowest ever. The Governor of the Central Bank told RÚV that the near-total halt to travel has meant Icelandic households are spending a lot more money at home than abroad, which is helping the economy weather the storm. The CBI has traditionally kept interest rates high to defend against inflation, but inflation has been below the target level since December and is not forecast to rise significantly.
- The CBI predicts an eight percent recession this year with unemployment peaking at 12 percent in the third quarter. The Bank predicts five percent growth next year.
- Finance minister Bjarni Benediktsson says the State will spend 100 billion krónur extra this year on direct action against the coronavirus crisis and that the crisis will see treasury income cut by 95 billion thanks to postponed tax bills. This means a deficit of around 200 billion, not including costs associated with State guarantees such as that offered in the Icelandair refinancing.
- Before Icelandair can agree a refinancing package with its investors on Friday, it needs to agree a new wage and conditions contract with its cabin crew. News this morning that the airline might be considering setting up its own cabin crew union and boycotting the existing national union has led to a threat from the ASÍ Confederation of Icelandic Labour to encourage sympathy strikes from other unions that would affect Icelandair. The boss of Icelandair promises there is no discussion underway to hire cabin crew from outside the union. Either way, last night’s negotiation meeting was postponed and no new date has been set.
- Iceland’s assembly restrictions will be eased to allow gatherings of up to 200 people from next Monday. Gyms will be allowed to open again at 50 percent capacity, and the two-metre rule will only be strictly enforced where essential services are provided. Bars, nightclubs and gambling establishments will be able to open again as well; though, just like premises that serve food, they must close at 23.00 each night.
- Finally today, doctors have confirmed that a rare condition that can cause a severe autoimmune reaction in children recovering from the coronavirus has not been recorded in Iceland to date. While very rare, the condition—similar but unrelated to Kawasaki disease—can cause severe complications in youngsters and has been recorded in North America and Europe. No child in Iceland has had a severe immune reaction while recovering from COVID-19.