Iceland Fights Carry Trade Threat With First Rate Cut Since 2014
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As it dismantles the last remnants of capital controls that have protected its economy since late 2008, Iceland is now battling an inflow of fast money seeking to profit from its higher interest rates and outperforming economy.
The central bank in Reykjavik on Wednesday cut its benchmark interest rate for the first time in 20 months as a surging krona has pushed inflation below target. The seven-day term deposit rate was lowered to 5.25 percent from 5.75 percent, the bank said. The decision marks a shift in policy after three rate increases in 2015.