Global Interest Rates are Increasing
If you live in the United States or England you may not believe, but higher interest rates are already here. A rash of interest rate hikes by central banks has lifted commercial and personal interest rates on loans, deposits and mortgages across the world. Led by interest rate increases in China, South Korea and Australia in recent months, the overall trend for higher interest rates globally is becoming firmer. The discrepancy between rates in different countries can have a major impact on currency exchange and ultimately trade deficits. It may be harder for the Federal Reserve Bank in the United States to hold on to their zero-percent rate policy if a few other major economies move rates higher.
Central banks who have lifted their rates are not doing it to benefit savers, their primary objective is controlling inflation. An important point to remember for savers is that inflation can destroy the purchasing power of their savings if it accelerates faster than the rates on their savings accounts. So while a 6% CD rate would be a real treasure to a saver in London or New York, it would not do them any good if inflation rose even faster.
Keep an eye on the Bank of England and ECB in the coming months for signs of interest rate increases. They may be the next to fall.
Central Bank Rate Movements and Actions in 2011
Israel +25 basis points
India +25 basis points
Turkey raises reserve requirements
Hungary +25 basis points
Serbia +50 basis points and raises reserve requirements
Brazil +50 basis points
Poland +25 basis points
South Korea +25 basis points