Monday, November 17, 2008

18% Interest Rate

"Iceland's central bank raised its benchmark interest rate by six percentage points to 18%, and Hungary agreed to take a $25.1 billion loan package organized by the International Monetary Fund, as the two countries tried to rescue their currencies. ... Hungary, which has been talking with the IMF for days, last week raised its key rate three percentage points to bolster a wilting forint. ... Rate increases are generally used to cool overheating economies and lower the risk of inflation. ... A further collapse in the krona would also kick up inflation, already running at 16% annually", Charles Forelle and Bob Davis at the WSJ, 29 October 2008.

Icleand bears watching to see what its central bank and the IMF will do with its currency and banking crisis.

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