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Telegraph: Northern Neighbour Ramps I R To 11.5%

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Iceland ramps interest rates to prop up krona as alarm bells continue

By Ambrose Evans-Pritchard (Filed: 31/03/2006)

Iceland's central bank slammed on the brakes yesterday, raising interest rates three quarters of a point to 11.5pc to curb inflation and restore faith in the battered krona.
The shock move marks an end to the bank's failed strategy of "baby steps", which has led to a housing bubble, fast-rising prices and wild over-leveraging by banks, some of it used to launch Viking raids on Britain's high street.
It follows weeks of mayhem in Icelandic markets triggered by warnings in February from the rating agency Fitch that the 300,000-strong island faced a "hard landing", with a current account deficit of 15.5pc of GDP.
The country has been a victim of this year's sudden reversal of the "carry trade", a flow of hot money funds from subdued economies such as Japan and Switzerland to higher yield - and higher risk - outposts as far afield as New Zealand, South Africa, and Turkey

Sound familiar?

So far, the UK has not been affected by the coming carry-trade disaster. Cheap credit is drying up everywhere (see Sapnish thread today) and inflated assetts will be hardest hit.

Edited by Realistbear

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The huge capital flows searching for yield has also been a feature of NZ's housing boom, dispite having the higest interest rates in the western world. The currency is also sharply lower, and its government debt rating is under pressure from rating agencies which could spark a further sell off.

The only thing is - the housing market is still rising!

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  • 336 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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