Global Interest Rates
Chart of the Week for November 20 - Nov 26, 2009
Key interest rates across the world fell in late 2008 and early 2009. Coordinated low rates were put in place by monetary authorities in an effort to increase the flow of money across the global economic system and attempt to help global economic growth.
Closest to home, the U.S. Federal Reserve ("Fed") has maintained the Federal Funds Target Rate between 0.00% and 0.25% since 12/16/2008. The Fed has dual goals of price stability and sustainable economic growth and utilizes the Federal Funds Target Rate as one of the primary tools to implement monetary policy in the U.S. If the Fed believes the economy is slowing, the Fed may implement an expansionary policy by lowering interest rates. Lowering interest rates tends to make borrowing cheaper and hopefully increase the pace of economic growth. One of the risks of lowering interest rates is the possibility of triggering higher inflation. If economic growth picks up or inflation fears increase, the Fed may implement a tightening policy and raise interest rates.
Rates in the U.S. and in key markets across the world have remained flat since early 2009. An exception to this trend are the two rate increases since September 2009 by the Reserve Bank of Australia. Whether other countries follow Australia's lead or not remains to been seen.
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