Már Guðmundsson: Recent economic and financial developments in Iceland

Speech by Mr Már Guðmundsson, Governor of the Central Bank of Iceland, at the 56th Annual Meeting of the Central Bank of Iceland, Reykjavík 30 March 2017.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Prime Minister, Minister of Finance and Economic Affairs, Speaker of Parliament, bank directors, foreign ambassadors, ladies and gentlemen!

We have come together today for the 56th Annual Meeting of the Central Bank of Iceland. At the time of last year's meeting, the domestic economy was considered relatively strong. GDP had risen above the pre-crisis peak. National income had risen even more in recent years because of improved terms of trade. Unlike many previous periods of full employment, the economy was well balanced internally and externally, as could be seen in a two-year period of inflation at or below target and a sizeable current account surplus. This was a good position, but we also realised that it could be fragile, as demand pressures were mounting and there was a real risk of overheating. Developments internationally had been favourable for us in many ways, but the tide could turn. We therefore needed to be on the watch, and economic policy had to take this risk into consideration.