Troubled Iceland: Interest Rate increased to 18 Percent

Iceland’s central banks have increased its key interest rate from 12 percent to 18 percent as it tries to save the country from a total financial collapse. This Icelandic rate jump comes less than two weeks after they cut the rates from 15.5 percent.

Iceland’s Prime Minister said in a meeting with other Nordic countries that the Iceland needed a further $4 billion (£2.6 billion) in loans. Shortly after news broke that he was raising the key interest rate to 18 percent.

The Icelandic government has been fighting off a collapse ever since it was forced to take control of three of its largest banks, Kaupthing, Landsbanki and Glitni Kaupthing after they had been hit with the credit crunch.

It wasn’t said how much extra money was needed from other Nordic countries such as Denmark, Norway, Finland and Sweden, the Prime Minister added that he didn’t want to put pressure on the countries.

Iceland has agreed already to a loan from the International Monetary Fund (IMF) for $2 billion. The Central Bank in Iceland will give reason for its decision in a statement that should be announced about 11am GMT today.

Source: BBC