Iceland's central bank Tuesday pushed its key interest rate up to a record high of 18% from 12%, reversing a hefty rate cut earlier in the month.
Trade in the Icelandic krona is at a virtual standstill and is fixed by the central bank in a daily foreign currency auction. Monday, the rate was fixed at 152 kronur to the euro and 120.69 kronur to the dollar.
It is as if the unwinding of the carry trade that blew them up in the first place was the thin shadow of a distant memory. Apparently, the massive hike is the IMF's bright idea.
Oh, what I wouldn't give for a foreign exchange account, access to the kronur and a big hunk of liquidity right now.
Iceland Raises Key Rate Six Points [The Wall Street Journal]