Checked the Value of the Kronur Lately?

Gylfi Arnbjörnsson wants the Central bank to lower the prime interest rate.  He points to lower inflation as the reason to proceed with a bigger reduction in the rate. Unfortunately, the kronur is far from stable at this time and the high interest rates are exacty why the inflation rate is so low. Any greater change at this point could send the kronur down further, putting the many companies and individuals with foreign currency loans ever closer to bankruptcy.  Also most homeowners have inflation linked loans. They have seen the costs of ther loans reduced 5,1% due to the lowering of the inflation rate. The only reason to lower  rates would be to allow more credit into the system. Since the banks are basically bankrupt and are not yet fully recapitalized they don't have any money to lend anyway. So why lower the rate?  The savings seen by those with non-index linked loans is small compared to the savings seen by a stronger kronur and lower inflation rate.  Any lowering of the prime interest rate and Iceland could be headed back down the road it came from.

GTB

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