Page last updated at 09:58 GMT, Thursday, 29 January 2009

Iceland interest rates unchanged

A bank customer holds a handful of Icelandic crowns
The krona has stabilised since its collapse in October 2008

The central bank of crisis-hit Iceland kept its key interest rate unchanged on Thursday at a record 18%.

Iceland's financial system collapsed in October under the weight of debt, leading to a currency crisis, rising unemployment and daily protests.

It increased rates by six percentage points in October - on the recommendation of the IMF - and they have remained at that level since then.

The economy is forecast to shrink by almost 10% this year.

The country's currency, the krona, collapsed in the October meltdown, although it has now stabilised.

But unemployment - once close to zero - is soaring.

Since October. the IMF has co-ordinated a $10bn financial aid package to steer Iceland out of its crisis.

On Monday, the coalition government collapsed under the strain of the economic crisis, after widespread protests.

Conservative Prime Minister Geir Haarde announced the resignation of his cabinet, after talks with his Social Democratic coalition partners failed.



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