Tuesday, October 28, 2008

In Defence of Currency (3)

Iceland lifts rates to 18% from 12%

Dorothy, Iceland, Bye Bye Iceland’s central bank lifted interest rates on Tuesday to 12 per cent from 18 per cent on the orders of the International Monetary Fund, highlighting the dramatic impact the organisation will have on the country’s ability to control economic policy. The move is an attempt to support the Icelandic krona, which has lost 70 per cent of its value during the crisis before trading in the currency halted. It is due to re-float within a matter of weeks, a development that is regarded as a key step in restoring Iceland’s international credibility.

Posted by lvmreader @ 02:27 PM (661 views)
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One thought on “In Defence of Currency (3)

  • planning4acrash says:

    Come on guys. This is not IMF policy. They gave the loan to avoid high interest rates. That is the role of central bank liquidity, to reduce demand for interbank loans, to keep down the cost of borrowing. The earlier cut was IMF led. The IMF clearly has no been able to come up with enough funds, thank God.

    What this will do, will cause banks to not hoard money unless they really need to, and will result in an influx of capital, protecting the currency. We have all been against low interest rates since 1995, but bulk at the appropriate solution, which is, higher interest rates than we would otherwise have had.

    This is not intervention, it is more about the lack of intervention, and rates heading up towards free market rates, putting more of a proper prices on money.

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