Stýrivexta

Stýrivexta is a term used in Iceland to refer to the central bank's policy interest rate. The primary objective of the central bank, Seðlabanki Íslands, in setting the stýrivexta is to maintain price stability, typically by controlling inflation. When the central bank increases the stýrivexta, it becomes more expensive for commercial banks to borrow money, which in turn leads to higher interest rates on loans for businesses and individuals. This can dampen economic activity and reduce inflationary pressures. Conversely, lowering the stýrivexta makes borrowing cheaper, encouraging spending and investment, and potentially stimulating economic growth.

The decision to change the stýrivexta is made by the Monetary Policy Committee of the central bank. This committee considers a range of economic indicators, including inflation rates, economic growth, unemployment, and international economic conditions, when formulating its monetary policy. The stýrivexta is a key tool that influences borrowing costs throughout the Icelandic economy, impacting everything from mortgage rates to business investment. Changes in the stýrivexta are closely watched by financial markets and the general public as they signal the central bank's outlook on the economy and its intentions for future monetary policy. The level of the stýrivexta can also affect the exchange rate of the Icelandic krona.