The knowledge that the central bank had an inflation target, in effect followed a Taylor rule after 2004, and that a depreciation of the exchange rate would feed rapidly into rising domestic prices, gave investors added confidence to invest in
kronur assets and assume the currency risk since they expected the central bank to continue raising interest rates in order to fight any depreciation of the currency.
On the one hand the import costs for bakeries and food retailers rose by almost 50 percent, while on the other our food exporters were selling in foreign currencies, so when the weakened
kronur was taken into account, they were showing a marked increase in their profits," said Jon Asbergsson, the managing director of the Trade Council of Iceland (TCI).
Monetary authorities would then have to tighten more forcefully; a loss of confidence in the
kronur would exacerbate the situation.
The next step in the liberalisation centres on offshore
kronur. We have made good progress in preparing the next measures, which the Governor will explain further in a few minutes.
In a statement, the bank said, 'The aim of these measures is to recoup foreign currency that the central bank of Iceland used to purchase offshore
kronur in the previous auction and sell
kronur to buyers that are prepared to hold them for at least five years.
One British pound (GBP) is worth approximately 191.16 Icelandic
kronur (ISK).
FL Group, which owns 100 percent of the airline, would generate an estimated ISK26 billion Icelandic
kronur (USD$371.3 million) profit from the sale of the stake based on the total value of the equity, Glitnir said in a statement.
The Central Bank sold dollars for 6.8 billion
kronur between 23 and 27 March; the pressures on the currency reflected uncertainty regarding the Central Bank's meeting on 27 March.
The 1990 budget eficit is expected to fall to just under 5 billion
kronur, or about 1-1/2 per cent of GDP.
Both of these measures increase the proportion of the reserves financed in
kronur. At the end of February, the reserves totalled 721 b.kr.
A free shuttle bus from the cruise terminal took us on the 15-minute journey to the city centre and a 3,000
kronur (EUR15.75) city tour on a red double-decker bus (www.city-sightseeing.com) which took in the main sights.
One British pound (GBP) is worth approximately 221.70 Icelandic
kronur (ISK).
The government pays the interest on a housing loan up to a maximum payment of 258 459
kronur, or about $3 000, per year for a married couple with no income.
A free shuttle bus from the cruise terminal took us on the 15-minute journey to the city centre and a 3,000
kronur (pounds 14.50) city tour on a red double-decker bus (www.city-sightseeing.com) which took in the main sights.
The effect of the tax measures is estimated to result in a gross revenue loss of some 7 billion
kronur (less than I per cent of GDP) by 2003.
