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Iceland's interest rate up to 18% Iceland's interest rate up to 18%
(30 minutes later)
Iceland's central bank has raised its key interest rate to 18% from 12% as the country battles against a complete financial collapse. Iceland's central bank has raised its key interest rate to 18% from 12% as it battles against financial collapse.
The increase comes less than two weeks after it cut rates from 15.5%. The rise comes less than two weeks after Iceland cut rates from 15.5%.
News of the rise came as Iceland's prime minister said the country needed another $4bn (£2.6bn) in loans. The central bank governor said the increase was in line with its agreement with the International Monetary Fund, from which it borrowed $2bn (£1.3bn).
Iceland has been struggling to avoid collapse since it was forced to take over its three biggest banks, which had been hit by the credit crunch. Iceland's prime minister said the country needed another $4bn in loans and had approached the European Central Bank and the US Federal Reserve.
The prime minister made his comments on the sidelines of a meeting with other Nordic countries. Central bank governor David Oddsson said that he hoped the rise in rates would only last for a short time and added that the move was designed to stabilise the currency.
Nordic summit
Iceland has been struggling since it was forced to take over its three biggest banks, which had been hit by the credit crunch.
The prime minister made his comments about the need to raise an extra $4bn on the sidelines of a meeting with other Nordic countries.
"It's not a precise number, it's not a scientific number but we are looking in that neighbourhood," Geir Haarde said."It's not a precise number, it's not a scientific number but we are looking in that neighbourhood," Geir Haarde said.
Mr Haarde would not say how much of the additional money he was hoping to borrow from the other Nordic countries: Sweden, Finland, Norway and Denmark.Mr Haarde would not say how much of the additional money he was hoping to borrow from the other Nordic countries: Sweden, Finland, Norway and Denmark.
"I do not want to put pressure on them," he said."I do not want to put pressure on them," he said.
The country has already agreed a $2bn loan from the International Monetary Fund (IMF).
Iceland's central bank will explain its decision in a statement due at about 1100 GMT.