Irish credit rating is downgraded

26 08 2010

The Irish Republic has had its credit rating downgraded by a leading ratings agency, Standard and Poor’s (S&P).

S&P fears that the growing cost of propping up the country’s troubled banking sector will further weaken the government’s finances.

It now thinks that the Irish government will spend 90bn euros ($101bn; £74bn) helping the banks, 10bn euros higher than previous estimates.

The country’s own debt agency described the analysis as “flawed”.

It claimed that S&P’s outlook was based on an “extreme and unrealistic” scenario of the cost of recapitalising the banks and questioned its calculations.

S&P cut the rating one step to from AA to AA-, its lowest since 1995.

This follows clearance earlier this month for an additional injection of 10bn euros into Anglo Irish Bank.

The agency now forecasts that net government debt – the sum of all borrowing – will rise to 113% of GDP in 2010. That would be a substantial increase on the 64% level recorded in 2009.

Continue Reading: http://www.bbc.co.uk/news/business-11081069





Iceland cuts interest rates to 7%

18 08 2010

Iceland’s central bank has cut its key interest rate to 7% from 8%.

A rate cut had been predicted after inflation eased and the country’s currency strengthened, although the reduction was larger than expected.

Iceland’s interest rate hit a peak of 18% in October 2008 when the country’s banking system was thrown into crisis by the global credit crunch.

The crisis led to the country’s largest banks being taken over by the government.

In late 2008, the International Monetary Fund approved a $2.1bn (£1.4bn) loan for Iceland, making the country the first Western European nation to get an IMF loan since 1976.





Bank of England member votes again for rate rise

18 08 2010

A member of the Bank of England’s Monetary Policy Committee (MPC) has voted again for a rise in interest rates.

Minutes from the MPC’s August meeting show Andrew Sentance voted to raise the Bank rate to 0.75% from the record low of 0.5%, citing high inflation.

It is the third month in a row that Mr Sentance has called for a rate rise.

The other MPC members at the meeting all voted for rates to be held at 0.5% for the 17th month in a row.

They also voted not to pump any more money into the economy under the programme known as quantitative easing (QE), but said they were ready to do so should conditions require it.

The Bank has already pumped £200bn into the economy under QE to help stimulate demand.

The MPC also said that financial markets had improved since its last meeting, thanks largely to the European-wide bank stress tests, which increased confidence in the banking sector.

But it added that lending conditions look set to remain tighter for longer than it had previously forecast.

Continue Reading: http://www.bbc.co.uk/news/business-11009844