Icelands Central Bank Interest Rates Hit 12.25 % Today

[Loanshark]

Iceland’s central bank raised its key interest rate sharply on Thursday in its latest bid to cool its overheating economy after a dramatic jump in inflation in the last few weeks.

It raised its policy interest rate by three quarters of a percentage point to 12.25 per cent, the highest level for at least 15 years, and the second consecutive 75 basis points increase since the end of March.

Icelandic inflation has surged from 4.5 per cent to 7.6 per cent since the end of March on the back of a consumption boom, rocketing house prices, wage rises and a sharp weakening of the Icelandic krona amid global foreign exchange turbulence.

Full story at FT.com

http://news.ft.com/cms/s/e55d34be-e68e-11d...00779e2340.html

[FrozenOut]

Nice to see the Government there in control and not lieing to the people.

[Jason]

Crikey.

Where can I find the interest rate history of Iceland?

[BuyingBear]

Iceland’s central bank raised its key interest rate sharply on Thursday in its latest bid to cool its overheating economy after a dramatic jump in inflation in the last few weeks.

overheating economy to prop up it's tanking currency, more like.

[Loanshark]

overheating economy to prop up it's tanking currency, more like.

Good job we have the £pound, a nice safe currency that has never had any trouble before !

[Surrey cash buyer]

Crikey.

Where can I find the interest rate history of Iceland?

Bank of Iceland

Interesting that they target CPI inflation in the same way as Bank of England. Their inflation target is 2.5%

[Warwickshire Lad]

You all must see the CPI inflation graph of Iceland - it's some spectacle :-

http://www.sedlabanki.is/?pageid=201

It's all going rather wrong there.

[BuyingBear]

You all must see the CPI inflation graph of Iceland - it's some spectacle :-

http://www.sedlabanki.is/?pageid=201

It's all going rather wrong there.

Quite, their statisticians are far too honest.

[Warwickshire Lad]

Quite, their statisticians are far too honest.

If you look at the Icelandic Bank's own CPI forecast, it's hopelessly wrong. The inflation genie is definitely out of the bottle there.

http://www.sedlabanki.is/?PageID=202

Of course, Iceland is a small country so you could argue that the economy is different to that of larger economies like the UK and the US - but is there really a lot of difference ?

IMHO this is a portent of what is to come, and I have a feeling that some serious s**t isn't far away from happening in the U.S.

[Robbrent]

If you look at the Icelandic Bank's own CPI forecast, it's hopelessly wrong. The inflation genie is definitely out of the bottle there.

http://www.sedlabanki.is/?PageID=202

Of course, Iceland is a small country so you could argue that the economy is different to that of larger economies like the UK and the US - but is there really a lot of difference ?

IMHO this is a portent of what is to come, and I have a feeling that some serious s**t isn't far away from happening in the U.S.

Did it not have something to do with the Carry Trade? Anyway they are just a glimpse intot he future, I have a strange feeling Ireland is in for it next, I don't know why

[BuyingBear]

Did it not have something to do with the Carry Trade? Anyway they are just a glimpse intot he future, I have a strange feeling Ireland is in for it next, I don't know why

Hrm, Ireland has the Euro so they're "all in it together". New Zealand is actually going through the same problems as Iceland, Australia is being supported by the commodities bubble, so their tanking property market is being offset.

[Guest Bart of Darkness]

I thought Iceland were on the slide when they stopped doing home deliveries.

[aclwalker]

I thought Iceland were on the slide when they stopped doing home deliveries.

I blame Kerry Katona.

[Warwickshire Lad]

New Zealand is actually going through the same problems as Iceland

Yep the Kiwi $ is currently sinking, a great time to go on holiday there. I'm planning one.

[Loanshark]

Did it not have something to do with the Carry Trade? Anyway they are just a glimpse intot he future, I have a strange feeling Ireland is in for it next, I don't know why

Yes its the carry trade effect.

New Zealand could be next and then ?

[BuyingBear]

Yes its the carry trade effect.

New Zealand could be next and then ?

could be err... it's already is!

The only way to constrain capital outflows in Iceland is the hope that 12.25% rates offset the risk and persuade people to leave the carry trade open, but once the run of hot money has started it's hard to counter that trend, especially given the events of the last week. Just like the emerging markets, people are selling up and running away.

A 12% repo rate isn't so attractive if the Krona tanks by a greater amount.

Edited May 18, 2006 by BuyingBear

[Randall Herbert]

overheating economy to prop up it's tanking currency, more like.

USD$ likewise.

Only the USD$ dollar has a long long way to fall....

[BuyingBear]

USD$ likewise.

Only the USD$ dollar has a long long way to fall....

Indeed, if it wasn't for the fact the USD has tanked in recent weeks and the fact gold has smashed through $700 barely a month after breaching $600... would the Fed still be talking about raising in June and August?

[Warwickshire Lad]

Indeed, if it wasn't for the fact the USD has tanked in recent weeks and the fact gold has smashed through $700 barely a month after breaching $600... would the Fed still be talking about raising in June and August?

I think that IR hikes still have some way to go in the US$.

The Fed will want to stop the hikes, but the markets won't let them stop.

[Randall Herbert]

Indeed, if it wasn't for the fact the USD has tanked in recent weeks and the fact gold has smashed through $700 barely a month after breaching $600... would the Fed still be talking about raising in June and August?

The main question on, anyone who holds mega amounts of dollar debt's lips, must be what is all this dollar debt worth?

Equal trade? and I promise to pay the 'bear'er on demand the sum of..... in .....something ....tangible??

Oil supply security?

World security?

Mililtary aid?

The promise of not kicking your butt?

US paper has little to offer. Ask the Chinese peasants in China who work for **** all to provide for the US...Chinese people are working for the West and for **** all!!!

[BuyingBear]

That's exactly why companies are trying to exchange those bits of paper for real tangible assets that produce a real returns that cannot be inflated away, and exactly why the US doesn't like it. Like Dubai Ports World? eek, China's CNOOC and their failed takeover of Unocal? People are now demanding collateral, this is equivalent to knee-cap territory for nation states.

Edited May 18, 2006 by BuyingBear

[Time to raise the rents.]

I'd personally like to see a graph of the Icelandic Krona over the last year. A country so dependant on imports can't go without inflation if the currency suffers.

The central bank site doesn't seem to offer a graph.

If NZ is going the same way then mining or not, Australia will go the same way as well & I've noticed the AUD moving in unison with the USD versus GBP in the last couple of weeks.

Looks to me like GBP & EUR might be the only safe haven currencies soon.

[Randall Herbert]

I'd personally like to see a graph of the Icelandic Krona over the last year. A country so dependant on imports can't go without inflation if the currency suffers.

The central bank site doesn't seem to offer a graph.

If NZ is going the same way then mining or not, Australia will go the same way as well & I've noticed the AUD moving in unison with the USD versus GBP in the last couple of weeks.

Looks to me like GBP & EUR might be the only safe haven currencies soon.

Surely "Bricks & Mortar" safe as houses TTRTR????

Gold is the place to be at the moment.

[jonathan trees]

What is happening in Iceland has absolutely no relevance here and it is just the doom-mongers once again clutching at straws in taking the slightest bit of bad news, no matter how trivial and irrelevant it is, just to justify a property crash occurring here.

Houses only ever go up in value. Cynics say that houses are far too overvalued and that even high earners can't afford them. But they forget that credit is much easier to get these days, and the "multiplier effect" means that you can't lose. For example, your parents can borrow against the equity in their home so that you can afford a house. Then, you simply sell when the price is high, and give them the difference back. There should be enough for you to move to a bigger house, too. Easy!

All that needs to happen is for this cycle to be repeated again and again. There's no doubt about it, the "boom and bust" days are over, and there's never been a better time to buy.

[Warwickshire Lad]

I'd personally like to see a graph of the Icelandic Krona over the last year. A country so dependant on imports can't go without inflation if the currency suffers.

This is the best I can find which only goes back 6 months, but the recent action is pretty clear :-

http://www.advfn.com/quote_UK-Sterling-vs-..._FX_GBPISK.html