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| Iceland's interest rate up to 18% | Iceland's interest rate up to 18% |
| (2 days later) | |
| Iceland's central bank has raised its key interest rate to 18% from 12% as it battles against financial collapse. | Iceland's central bank has raised its key interest rate to 18% from 12% as it battles against financial collapse. |
| The rise comes less than two weeks after Iceland cut rates from 15.5%. | The rise comes less than two weeks after Iceland cut rates from 15.5%. |
| The central bank governor said the increase was part of its agreement with the International Monetary Fund, from which it borrowed $2bn (£1.3bn). | The central bank governor said the increase was part of its agreement with the International Monetary Fund, from which it borrowed $2bn (£1.3bn). |
| Iceland's prime minister said the country needed another $4bn in loans and had approached the European Central Bank and the US Federal Reserve. | Iceland's prime minister said the country needed another $4bn in loans and had approached the European Central Bank and the US Federal Reserve. |
| Currency slump | Currency slump |
| 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. | 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. |
| It is the very same policy that has caused considerable damage in previous IMF rescues, such as in the Asian crisis Jon Danielsson, London School of Economics Why raising rates won't work | It is the very same policy that has caused considerable damage in previous IMF rescues, such as in the Asian crisis Jon Danielsson, London School of Economics Why raising rates won't work |
| "With the collapse of three banks and the harsh external measures that followed, Iceland's foreign exchange market became paralysed," the bank said in a statement. | "With the collapse of three banks and the harsh external measures that followed, Iceland's foreign exchange market became paralysed," the bank said in a statement. |
| The government has imposed strict foreign exchange restrictions on the trading of its currency. | The government has imposed strict foreign exchange restrictions on the trading of its currency. |
| The Icelandic crown traded internationally for the first time for a week on Tuesday, with the value slumping to 240 to the euro from Monday's official fix of 152. | The Icelandic crown traded internationally for the first time for a week on Tuesday, with the value slumping to 240 to the euro from Monday's official fix of 152. |
| There has been some criticism of the conditions that the IMF has placed on its loans over the years, which have also included currency devaluations and austerity programmes. | There has been some criticism of the conditions that the IMF has placed on its loans over the years, which have also included currency devaluations and austerity programmes. |
| "Given the damaging role of high interest rates in events leading up to the crisis, it is very unfortunate that as a part of their conditions, the IMF has insisted on a high interest policy," says Jon Danielsson at London School of Economics. | "Given the damaging role of high interest rates in events leading up to the crisis, it is very unfortunate that as a part of their conditions, the IMF has insisted on a high interest policy," says Jon Danielsson at London School of Economics. |
| "Indeed, it is the very same policy that has caused considerable damage in previous IMF rescues, such as in the Asian crisis." | "Indeed, it is the very same policy that has caused considerable damage in previous IMF rescues, such as in the Asian crisis." |
| Nordic summit | 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. | Iceland has been struggling since it was forced to take over its three biggest banks, which had been hit by the credit crunch. |
| The country's Prime Minister, Geir Haarde, made his comments about the need to raise an extra $4bn on the sidelines of a meeting with other Nordic countries. | The country's Prime Minister, Geir Haarde, 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," Mr Haarde said. | "It's not a precise number, it's not a scientific number but we are looking in that neighbourhood," Mr 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. |