You are here: Home > articles > Forex > A Look at the Current State of Global Interest Rates and the Risk Ahead
A Look at the Current State of Global Interest Rates and the Risk Ahead
January 18, 2019 2:41 pmVideo
Latest News
- Trading Signals for GOLD (XAU/USD) for April 19-22, 2024: sell below $2,395 (+2/8 Murray – overbought) April 19, 2024
- USD/JPY: Simple Trading tips for novice traders on April 19th (US session) April 19, 2024
- GBP/USD: Simple trading tips for novice traders on April 19th (US session) April 19, 2024
- EUR/USD: Simple trading tips for novice traders on April 19th (US session) April 19, 2024
- GBP/USD: trading plan for the US session on April 19th (analysis of morning deals). The pound is trying to regain its advantage April 19, 2024
- EUR/USD: trading plan for the US session on April 19th (analysis of morning deals). The euro compensated for the losses April 19, 2024
- Storm in a teacup: EUR/USD analysis April 19, 2024
- Video market update for April 19, 2024 April 19, 2024
- Eurozone PMIs eyed as euro’s focus turns to rate cuts beyond June – Preview April 19, 2024
- Technical Analysis – NZDUSD falls to fresh 5-month low April 19, 2024
- EUR/USD. April 19th. Bostic, Fed: the rate cut will happen at the end of the year April 19, 2024
- Forecast for GBP/USD pair on April 19, 2024 April 19, 2024
- Weekly Forex Outlook: 14/04/2024 – US GDP and BoJ decision on top of next week’s agenda April 19, 2024
- Market Comment – Safe havens jump as Israel retaliates against Iran April 19, 2024
- Technical Analysis – USDCAD puts rally on hold near 1.3800 caution zone April 19, 2024
- USD/JPY: trading tips for beginners for European session on April 19 April 19, 2024
- GBP/USD: trading tips for beginners for European session on April 19 April 19, 2024
- EUR/USD: trading tips for beginners for European session on April 19 April 19, 2024
- Supercharged US dollar turns to GDP growth data – Preview April 19, 2024
- Technical Analysis – USDCHF remains in bullish structure April 19, 2024
Interest rates are very important
in the world today. They are special tools that central banks have to influence
the monetary policy of their countries. After the financial crisis, the world’s
largest central banks decided to bring interest rates to zero. The goal for
this was to stimulate growth by making cost of borrowing relatively cheaper.
More than 10 years after the
start of the financial crisis, the central banks have not reacted a lot to
adjust their monetary policies. Around the world, interest rates are at the
lowest levels in decades. This is despite the economic boom that has happened
in after the end of the crisis.
The most active central bank has
been the Federal Reserve, which started normalizing in 2015. Since then, the
bank has made more than 10 interest rate hikes and is now embarking on a plan
to shrink the balance sheet. Even with the interest rates hikes, the interest
rates are still at historic lows. This year, the bank has signaled that it may
reduce the number of hikes from last year’s four to about two. Some analysts
believe that the Fed could also be forced to slash rates.
In Europe, the European Central
Bank has retained the crisis-era interest rates, which are now in the negative
territory. This year, the bank ended the asset purchase program commonly known
as the quantitative easing. In the final meeting, the bank pointed to a rate
hike later this year. However, as the European economy continues to weaken,
there are chances that this will not happen. Recent data show an economy that
is weakening at a faster rate than had earlier been expected with Germany expected
to face a recession. Therefore, there are still limited chances that the bank
will hike this year.
In the United Kingdom, the Bank
of England has been caught in a difficult position and it is difficult to
forecast what will happen. After the crisis, the bank has made a number of rate
hikes. This year, with the UK being at crossroads, it is very difficult to
imagine what will happen. In case of a smooth exit from the EU, there are
possibilities that the bank will make at least one rate hike. In case of a
no-deal Brexit, there is a possibility that the bank could even lower rates.
In Japan, the BOJ has retained
the crisis-era interest rates, which are now in the negative territory. The
challenge for Japan is that while the economy is doing well, the rate of
inflation has remained subdued. This means that the BOJ will probably have
limited chances of hiking rates at a time when the inflation rate is very low.
All these factors have
contributed to increased borrowing around the world. Recent data shows that the
world debt is more than 3 times the global GDP. This is the highest level ever.
Therefore, if there is another recession in future, there are chances that it may
be the worst ever.
The post A Look at the Current State of Global Interest Rates and the Risk Ahead appeared first on Forex.Info.
Related Posts: