Landesbanki was a safe bet ....think again......Iceland is in Crisis!
Iceland raises rates to 12.25pc
By Ambrose Evans-Pritchard (Filed: 19/05/2006)
Iceland has taken drastic action to halt the slide of its currency and curb inflation, raising interest rates by three quarters of a point to 12.25pc.
The move came as global inflation jitters set off another bout of selling on over-heated emerging markets, led by a 7pc crash on India's Bombay exchange.
Tata Steel and Hindalco Industries both tumbled more than 10pc, while cement companies plummeted on fears that rising rates spelled the end of India's boom.
The US, European and UK markets were mostly calmer after the wild sell-off on Wednesday, while commodities slipped back. The FTSE 100 was down 3.90 points to 5671.60.
Iceland has been in a free-fall since February, when a credit downgrade by Fitch Ratings set off a flight of hot-money by foreign funds.
Analysts said the central bank was forced to slam on the breaks after a 17pc fall in the Krona this year pushed inflation to 7.6pc in May, near the danger level. "They are aware of credibility issues and will remain hawkish," said TD Securities.
Signs of inflation are now appearing across the global system, reaching 0.6pc in April in America. US prices are up 5.1pc over the past year and still accelerating as the effects of energy oil and commodity costs feed through.
In Britain shoppers returned in force to the high street in April, where sales jumped 0.9pc led by purchases of flat-screen TVs in advance of the World Cup.
Signs of a retail rebound are likely to nudge the Bank of England towards an interest rate rise later this year.
David Walton, the lone member of the Monetary Policy Committee calling for a rate rise in May, said he feared that output growth had now risen above the sustainable trend rate of the economy.