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Iceland Lifts Key Rate to 15% at Unscheduled Meeting (Update5)

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March 25, 2008 – Comments (4)

Iceland Lifts Key Rate to 15% at Unscheduled Meeting (Update5)

"March 25 (Bloomberg) -- Iceland's central bank raised its key interest rate by a record 1.25 percentage points at an emergency meeting to halt a slump in the krona and a surge in inflation. The currency made its biggest ever jump against the euro.

Sedlabanki raised the repo rate to 15 percent, the Reykjavik- based bank said on its Web site today. It hadn't planned to hold a rate meeting until April 10. It was ``crucial'' to reverse the krona's decline ``as quickly as possible,'' the bank said.

The krona tumbled 17 percent against the euro in the past three weeks on concern that the global financial turmoil would make it harder for Iceland to finance one of the world's largest current account deficits. The country risks ``spiraling'' wages and inflation if that decline isn't pared, the central bank said. Inflation reached a one-year high of 6.8 percent last month."

MY COMMENT: For all you kids and CNBC educated "investors", you might want to go to a university libary and take a read on the 1970-80 US STOCK MARKET. When P/E ratios were 6-7, verses todays 16-20 and interest rates were 10 TO 20% vs todays 2.5%.

The Krona fell 17% against the Euro and the central bank RAISED rates to 15%.

The US dollar has fallen 50% against the Euro and the Central Bank will raise rates to ___.

Despite the loss of 94% of the US dollars purchasing power the US Central Bank has survived 90 years. The FED will likely do whatever it takes to keep its PRIVATE monopoly entact. If the US dollar collapses their PRIVATE Monopoly will likely be lost, which they do not want to happen. 

4 Comments – Post Your Own

#1) On March 25, 2008 at 8:32 PM, tradingfool2 (24.01) wrote:

That makes an 6-8% mortgage look like a great deal.

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#2) On March 25, 2008 at 8:37 PM, abitare (49.76) wrote:

tf2,

Yep, but people do not buy on rate, they buy on payment.  

Guess how much house the average American can buy at 10-15%?

That will just about cut the current home price levels in half. If you think there is a foreclosure market now, just wait and see....

 

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#3) On March 25, 2008 at 10:03 PM, dwot (45.74) wrote:

Yup, and US has so much debt, I think longer term it falls against other currencies.

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#4) On March 25, 2008 at 10:15 PM, abitare (49.76) wrote:

dwot,

Thanks for the reply. Bloomberg has an interview, that there maybe a FED intervention to prop up the dollar.  www.bloomberg.com

Video with MF commodity trader. 

 

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