Financial and Mortgage Portfolio Overview
Highlights
Following nearly 3% appreciation in
2021, the ISK strengthened further by
just over 5% in 1H2022
ISK exchange rate and CBI FX market intervention
EUR m (left) and EURISK (right)
ISK likely to appreciate further
CA surplus and inflows for securities purchases offset pension funds' foreign investments
Real exchange rate and current account balance
Index and % of GDP
250
165
120
15
The CBI steadily scaled down its FX
market intervention over the course of
2021
200
Increased ISK volatility in the first third of
2022 led to the CBI stepping up FX
interventions once more, mainly leaning
against short-term appreciation trends
Improving C/A balance outlook, rising
interest rates, Iceland's strong IIP, solid
growth outlook and limited non-residents'
securities holdings all weigh in favour of
stronger ISK in the medium term
150
160
110
155
100
150
10
5
100
0
90
145
50
-5
Increasing foreign investment by pension
funds and possible CBI FX reserve
purchases may weigh against ISK
strengthening
0
-50
It is impossible to pinpoint how the
appreciation will materialise, but ISB
Research's forecast assumes that the
ISK will be about 5% stronger at the end
of the forecast horizon than at the end of
June 2022
-100
་་ ་།་
140
80
135
70
$130
60
125
-10
-15
-20
-150
120
50
-25
The real exchange rate in terms of
relative consumer prices will then be
similar to that in 2018
2018
2019
2020
2021
2022
1991
1995 1999 2003 2007 2011 2015 2019 2023
Scheduled interventions
-EUR/ISK (r.axis)
Discretionary interventions
C/A balance, % of GDP (r.axis)
RER, relative prices (l.axis).
RER, relative wages
Source: Statistics Iceland, The Central Bank of Iceland, ISB Research.
48
August-September 2022View entire presentation