Iceland raises benchmark interest rate for the second time since June http://t.co/Ei70oylX9Q
— Bloomberg Markets (@markets) August 19, 2015
No kidding! Hey morons the brake pedal is on the left!
Get ready USA if the Fed sets off this process next month...
To be certain of the interest raises effects we would have to look at the income share, liabilities of the population and demographics IMO
ReplyDeleteIt's not a linear relation, but in a 'healthy economy' overall interest rates hikes would be a positive feedback loop (ie. procyclical). The question if Iceland is a 'healthy economy' right now (ie. one where most participants would benefit from interest rates income channel more than hurt because they are loaded with liabilities).
I,
ReplyDeleteLooks like the link is dead at B-berg but if you search up the article the policymakers there are seeing a resurgence of the domestic sector and rates are up now above 6% (with the new raise...) so like you say 'positive feedback loop' and pro-cyclical.... when they raise the rates this just increases the rate of interest flows from govt to non-govt and increases "velocity" (for lack of a better term) within the intra-non-govt sector...
Link:
http://www.bloomberg.com/news/articles/2015-08-19/iceland-raises-collateral-lending-rate-to-6-25-from-5-75-