“Iceland’s króna will never be a full free-floating currency”

Bjarni Benediktsson, Iceland's Finance Minister.

Bjarni Benediktsson, Iceland's Finance Minister. Photo: Iceland Monitor/Eggert

Even after capital controls on the Iceland króna have been lifted, it is unlikely that it will ever again be a full, free-floating currency, Iceland’s Finance Minister has admitted.

“That wouldn’t be prudent,” says Benediktsson in an interview with Bloomberg.

Stability is the name of the game, according to Benediktsson, with the aim of “treading a path towards releasing capital controls and at the same time maintaining lower interest rates, sustaining low inflation, high employment numbers, and Iceland’s overall competitiveness.”

“Macro-prudential measures” will remain once capital controls are lifted in order to ensure offshore investors have a longer-term interest in Iceland’s future – and are not just after a quick profit.

Most major currencies are fully free-floating, but Benediktsson does not see the króna ever returning to this status, as it was before the 2008 financial crash.

That said, he is also confident that “we won’t have capital controls of the kind that we’ve had since 2008”.

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