Iceland sets up swaps with Nordic CBs
The central bank will set up swap facilities with three of its Scandinavian counterparts worth as much €500m ($779m) each in a bid to shore up the krona, which has lost more than a quarter of its value against the euro since the start of this year. The krona appreciated by almost 5% against the euro on the back of the announcement.
"The above agreements significantly enhance the available international liquidity of the Central Bank of Iceland. The central bank intends to further bolster its external liquidity in the period ahead," the central bank said, describing the facility as "a precautionary measure".
The slump in the krona's value has caused inflation to soar since last summer from less than 4% in the year to August to 11.8% in the 12 months to April. The central bank has raised rates to a record high of 15.5%, making borrowing costs here higher than in anywhere else in Europe until Turkey tightened on Thursday [hyperlink]. Further rate hikes are expected on 22 May, when the central bank's monetary policy committee next meets.
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