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The US treasury may have halted a global market dive some feared would cost billions of dollars.
An interest rate cut as dramatic as 0.75% could make it easier for Americans to manage their mortgages and debt.
But some business leaders say this action is too little, too late.
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Now that the Canadian dollar is at parity with the US dollar, I’ve been hearing in the news that the Bank of Canada will be hiking interest rates. What is the reason behind this? How exactly does the dollar affect the interest rate? Thanks!
The dollar does not affect the interest rate.
What the problem is, is the parity dollar, it makes exporting companies less competitive so the Canadian gov’t would really like a lower dollar.
But The Canadian gov’t also sees an overheated economy and is worried about inflation, and they will raise interest rates to stem inflation. Unfortuneatly this will attract more money to Canada and will raise the value of the dollar furthur
Like possible CDA/US 1.10/1 in a few years
During the 1970′s interest rates on basically everything including savings and CD were well into double digits. What caused this? In order for interest rates to be that high again where would the market in general be headed? I understand how the economy and interest rates generally work but 10,12 percent seems crazy. How bad would inflation be?
If interest rates went up it will decrease the purchasing power of the people, which would in turn lead to reduction in inflation as too little money will be chasing too many products.
It’s not made clear as to what sort of economic sectors the question refers to.
I know this much at least:
-Increasing interest rates
Higher mortgage costs
Lower CPI
Prevents inflation
Slows the economy (decreasing GDP)
Higher risk of recession
-Decreasing interest rates
Lower mortgage costs
Higher CPI
Steers economy towards inflation
Speeds up the economy (increasing GDP)
Lower risk of recession
what i don’t know is how this affects 2 different sectors of the economy.
Are different sectors affected differently at all?
Yes diffrent and Non diffrent.
manoftruth explains what is going on with interest rates.
http://manoftruth.org/gold-forex-trading/
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A mere quarter basis point hike in key interest rates may not impact our lives as of now but industry players say that in the next few months further tightening may hurt the consumers.
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It’s not made clear as to what sort of economic sectors the question refers to.
I know this much at least:
-Increasing interest rates
Higher mortgage costs
Lower CPI
Prevents inflation
Slows the economy (decreasing GDP)
Higher risk of recession
-Decreasing interest rates
Lower mortgage costs
Higher CPI
Steers economy towards inflation
Speeds up the economy (increasing GDP)
Lower risk of recession
what i don’t know is how this affects 2 different sectors of the economy.
Are different sectors affected differently at all?
Yes diffrent and Non diffrent.
Confused about the theory of how interest rates can affect economic growth? Senior Editor Paddy Hirsch is here with a handy analogy.
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Is there a connection between the interest rates banks set and the Bank of England’s interest rate? Does the Bank of England control the retail bank’s interest rates? Or do the banks set them independently of the Bank of England?
There is a conection between the two. When the BOE increases the rate this increases the rate that the retail banks have to pay back to the BOE. The retail banks naturally pass this on to their customers.
I’m buying a house and I close on October 31. It’s a FHA loan and right now my rate is 6.375%. Should I lock in beforehand or should I wait for the bailout package to pass? What will happen to interest rates?
Rates aren’t based on the bailout, they’re usually based on the 10 year treasury bill, which is considered a safe investment since it’s guaranteed by the US government.
T-Bills have been popular lately due to their guaranteed return, so when their yields go up, rates go down.
Rates will probably increase since people will have more confidence in the market and start selling their T-Bills and buying stocks if the bailout goes through.
These are unprecidented times though and nobody can really predict what will happen with rates. I could be 100% incorrect. If you’re happy with 6.375% rate, I would definitely lock it in.
