Iceland interest rates cut to 11%

Iceland's central bank has cut interest rates to 11% from 12%, as hopes build that the country is starting to stabilise after the financial crisis.

Interest rates have now fallen significantly since March, when they stood at a record high of 18%.

Iceland had held rates high in order to defend its currency, which came under threat as a result of the collapse of the country's banking system last year.

The krona has now stabilised, which means the central bank can lower rates.

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

As a result, it was forced to agree a $10bn (£6.1bn) aid package with the International Monetary Fund.

"There has been a huge turnaround in the current account, from deficits of 20% of GDP. Now it's positive," said Kent Baek Iversen at Jyske Bank.

The reason, he said, was the weak krona, which has made Icelandic exports more competitive.

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