The short-term spectral variability of the narrow-line Seyfert 1 galaxy I Zwicky 1 (I Zw 1) as observed in an 85 ks XMM-Newton observation is discussed in detail. I Zw 1 shows distinct modes of variability prior to and after a flux dip in the broad-band light curve. Before the dip the variability can be described as arising from changes in shape and normalisation of the spectral components. Only changes in normalisation are manifested after the dip. The change in the mode of behaviour occurs on dynamically short timescales in I Zw 1. The data suggest that the accretion-disc corona in I Zw 1 could have two components that are co-existing. The first, a uniform, physically diffuse plasma responsible for the typical long-term (e.g. years) behaviour; and a second compact, centrally located component causing the rapid flux and spectral changes. This compact component could be the base of a short or aborted jet as sometimes proposed for radio-quiet active galaxies. Modelling of the average and time-resolved rms spectra demonstrate that a blurred Compton-reflection model can describe the spectral variability if we allow for pivoting of the continuum component prior to the dip.
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