The policy rate (stýrivextir) is the interest rate the Central Bank of IcelandCentral bankThe bank that issues a country's currency, sets interest rates and safeguards financial stability. In Iceland it is the Central Bank of Iceland. uses to influence rates across the economy. The bank itself calls it its key rate (meginvextir), and it is currently the rate on banks' seven-day term deposits with the Central Bank. When it changes, banks usually change their own InterestInterestThe price a borrower pays to borrow money, and what a saver earns for lending it. Usually given as a percentage per year. rates soon after, on both deposits and loans.
Who sets it?
The Central Bank's Monetary Policy Committee, which has five members, sets the policy rate. By law the committee meets at least six times a year and publishes a statement on each decision. The aim is to keep InflationInflationA general rise in prices over time, which means each króna buys less than before. as close as possible to 2.5% a year on average.
How does it work?
When the Central Bank raises the policy rate:
- loans become more expensive, so people and companies borrow less
- saving becomes more attractive
- demand in the economy falls, and with it the pressure on prices
- the króna usually strengthens, which lowers the price of imported goods
A cut works the other way. The effects don't show up straight away, though, but over several quarters.
The policy rate in Iceland
Iceland's policy rate has long been higher than in neighbouring countries. In August 2023 it reached 9.25% and stayed there for over a year. Cuts began in October 2024, and the rate was down to 7.25% at the start of 2026. During 2026 the bank raised it again in three steps, to 8.00% in August, and at its meeting on 7 October 2026 it left the rate unchanged.
When the policy rate is high and inflation is lower, the real interest rateReal interest rateThe interest rate minus inflation. Real interest shows whether savings are really growing in value or shrinking, even as the number of krónur rises. is high. That slows the economy down, which is exactly the point.
The policy rate and crypto
Interest rates affect all assets, crypto included. When rates are high, deposits and bonds earn better returns and less money flows into risky assets. Crypto prices are set on global markets, though, where the rates of the world's largest central banks, especially the US Federal Reserve, matter more than Iceland's policy rate.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 2 November 2026.