Iceland's central bank cuts rates to record low to ease coronavirus impact

FILE PHOTO: A man walks into the headquarters of Iceland's central bank in Reykjavik October 9, 2008. REUTERS/Bob Strong (ICELAND)

COPENHAGEN (Reuters) - Iceland’s central bank slashed its benchmark interest rate to its lowest ever level on Wednesday, a week earlier than its scheduled rate decision, as it tries to alleviate the potential impact of the coronavirus on its tourism-dependent economy.

The 50 basis point cut to 2.25% follows five rate reductions last year as tourism struggled and the fishing season failed, and a 25 bp cut in February to 2.75%, itself a record low. Central bank policymakers had been due to meet on March 18.

“With these actions, the Bank is easing the monetary stance in view of the worsening economic outlook following the accelerated spread of the COVID-19 virus,” the central bank said in a statement.

Iceland’s Department of Civil Protection and Emergency Management has reported 81 coronavirus cases, some of whom were infected inside the country.

The central bank also said it would lower deposit institutions’ average reserve requirement to 0% from 1% to ease banks’ liquidity positions.

Reporting by Nikolaj Skydsgaard and Jacob Gronholt-Pedersen; Editing by Catherine Evans