Kreppa - Part 2

The Icelandic kronur is on the way down once again after seeing some improvement earlier this year. Gas and diesel prices have already gone up signaling the beginning of higher inflation.  This means higher food prices, higher mortgage payments and higher payments for companies and individuals with foreign currency loans.  That will bring more loan defaults and more bankruptcy.  The slide of the kronur was worsened by the lowering of the prime interest rate. Any savings seen now by the 1% decrease is about to be wiped out by the rise in inflation.  The Central Bank should no longer bow to political pressures and instead raise the prime rate to shore up the kronur.  The entire recovery in Iceland depends on a stronger kronur or the taking up of another currency.  Maybe the government will gain the political will to pursue another currency when every company is bankrupt and every house is owned by the housing fund. By then though it will be too late.

GTB

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