it as good as possible at all times. i am merely pointing out the best way to safeguard the nation ’ s living standards now, when we must adapt to a changed reality in the global markets and in international relations. and it is obvious. we must all participate in the fight against inflation – even those who stand outside the labour unions. we cannot stand by and watch the corporate sector cut its ties to icelandic reality as regards developments in wages. the question of how much the central bank may need to raise interest rates to maintain stability will only be answered in the wage settlements this coming autumn. honoured guests : iceland ’ s economic position has never been better, no matter how it is measured. in spite of everything, households ’ purchasing power is growing, even though inflation has risen. in spite of everything, household debt has not risen discernibly as a share of disposable income. in spite of everything, homebuyers with nominal - rate loans are paying negative real interest for the first time in 40 years. the pandemic wreaked havoc on a large number of businesses, but decisive action by the central bank and the government has provided a cushion against the blow, and now companies in general are well positioned – with the caveat that many tourism companies have yet to right themselves. it is also very important that iceland ’ s external position be well - balanced. our net external asset position is positive : we own more than we owe abroad. this means that foreign interest rate hikes will not erode our balance of payments. the exchange rate of the icelandic krona is also close to equilibrium, and the financial system is no longer dependent on external financing as it once was. and last but not least, the central bank holds some 900 b. kr. in international reserves so as to secure iceland ’ s balance of payments and prevent upheavals in the foreign exchange market. we have everything we need to protect iceland against tidal surges from the international open sea. it is also important that iceland is no longer a marginalised inflation incubator but is well aligned with its trading partners. a global battle against inflation is about to begin, with the world ’ s largest central banks tightening their monetary stance. and that will be of benefit to us in our quest to maintain stability. i would like to close with a well - known quote published by cartoonist walt kelly on 22 april 1970, the first earth day. it reads as follows : “ we have met the

since 1996, the tighter monetary stance has led to a 2 - 3. 5 % appreciation of the real exchange rate. at the same, the real exchange rate appreciated by 10. 5 %. studies also indicate that this appreciation in the real exchange rate caused the current account deficit to widen by 0. 5 - 2 % of gdp, but that it will shrink again in the course of time. bearing in mind that last year's current account deficit was equivalent to 10 % of gdp, rises in interest rates have clearly not had much impact on it. a wide range of other obvious factors are at work there. suffice it to mention large - scale investment in power - intensive industries and other sectors during the first half of the period in question, a major increase in real disposable income in the past few years and credit expansion which has been funded by foreign borrowing. the central bank's monetary policy has therefore played a minor role in this development and its impact has primarily been of a short - term nature and will eventually be levelled out. of course, the central bank is also aware that open access to foreign capital softens the impact of its monetary policy. however, it should be borne in mind that access to foreign capital is not unlimited in the final analysis, and is neither risk - free nor available to all icelandic companies. household and corporate sensitivity to interest rate changes may be low at present, but in the long term the impact of higher interest rates cannot be avoided. the central bank is convinced of the impact that its interest rate instruments have, and recent discussions about high interest rates can be cited as precisely such evidence that their impact is being felt in full. furthermore, the central bank has been accused of basing its assessments of economic developments on somewhat outdated data. undoubtedly there is always scope for improvement, but the central bank does compile extensive data about financial market developments on a monthly basis, and various other data even more frequently. its data on the exchange rate of the krona, for example, cannot be more up - to - date. naturally, the bank uses data supplied by other agencies as well. it also acquires information through other channels, such as both informal and formal meetings. for this reason it is simply wrong to claim that the bank's resistance to easing its monetary stance is based on outdated information. the central bank has declared that it will maintain tight money until unequivocal signs of a cooling in the economy begin to appear. such