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Bank of Canada Keeps Benchmark Rate Unchanged

September 6, 2018 by Jason Shortes

The interest rate was maintained at 1.5% by the Central Bank, an indication that the NAFTA talks could influence the pace of increases in the future. On Wednesday, the Bank of Canada kept its standard interest rate stable at 1.5% as there is a possibility that the North American Free Trade Agreement could have a significant impact on the increases of future rates.

In a short policy statement, the central bank opined that higher interest rates would be required to ensure inflation is kept close to its 2% target. The central bank also confirmed that it would continue to engage a systematic style to increase rates, backed with incoming data and the reaction of the economy to higher rates.

In its policy statement, the bank also confirmed that it is also ensuring the monitoring of the NAFTA discussions and other trade policy expansions, as well as their influence on the outlook of the inflation. However, the central bank of Canada fixes interest rates to maintain and achieve 2% inflation over the long term.

In the words of Josh Nye, an economist with the Royal Bank, he said that the statement strengthened the expectations of analyst that the Bank of Canada will increase the key interest by a quarter-percentage point at a policy declaration in the latter part of October. He also said that in the case of an unforeseen weakening in business reaction or the disbanding of NAFTA, the increase in the rate by October remains unchanged.

However, the interest-rate decision was released on Wednesday, the same day that United States and Canada negotiators were supposed to discuss the NAFTA negotiations in Washington after they avoided a deadline imposed by the United States on Friday. During the early part of the week, Mexico and the United States of America agreed on their trilateral deal, and this has placed Canada under severe pressure to conform to the conditions given by the United States or be eliminated from the accord.

According to a study by the Bank for International Settlements, NAFTA is considered to be important for Canada, as a significant part of its exports are shipped to the United States, Canada will be the biggest loser if the deal is suspended. According to the data offered by Statistics Canada on Wednesday, the exports of Canada increased in July thereby reducing the trade deficit of the nation with the other countries of the world.

In a statement released by the central bank on Wednesday, the Bank of Canada has expressed concerns about the aftermath of the trade deal’s future for more than twelve months. It has been trying to increase interest rates after maintaining them at super-low levels in a bid to ensure the recovery of the economy from the financial disaster and the 2014 reduction in the prices of the global commodity. The business investment in Canada has been affected by the doubt surrounding the trade policy. The central bank also confirmed that increased trade tensions have posed a threat to the global outlook and playing a role in the reduction of some commodity prices when the economy of the United States is performing excellently.

The Bank of Canada asserted that the headline inflation at a rate higher than the anticipated rate at 3% in response to the maintaining the key rate on hold. The central bank suggested that there is an expectation of the inflation moving to its 2% target in the early part of 2019, as the impact of previous increases in the prices of gas disappears. It has also been observed that the instruments of fundamental and core inflation are unchanged around 2%.

According to the Central Bank Governor, Stephen Poloz, he confirmed that the economy of Canada is progressing according to the new prediction which was released in July. Nevertheless, the economic growth is expected to experience slowness in the next few months on additional variations in exports and energy production. The deputy governor of the central bank, Carolyn Wilkins is expected to deliver a speech on Thursday which is anticipated to grow on the outlook of Canada.

The Bank of Canada said the business investment and exports have been increasing for some segments irrespective of the risks involved in trade policy. It is noteworthy that the housing activity is stable after the introduction of strict mortgage-financing regulations and increased interest rates.

According to a Wall Street Journal survey of economists, the Bank of Canada was expected to keep interest rates on hold, as they opined that the doubt surrounding NAFTA and the belief that rate increases should be taken slowly would ensure the shelving of the central bank until October. However, the next arranged decision will be provided on October 24.

Since the mid-2017, the interest rates have been increased four times by the Bank of Canada, with the most recent one in July.

For comments and feedback: editor@bestratedirect.com

Filed Under: Bank Rates, News, World

Turkey’s Lira: words not sufficient to Raise Interest Rates

September 5, 2018 by Jason Shortes

The Turkish lira may become viable after the central bank gave signs higher interest rates were underway, but some investors are concerned that any effective relief will require an extreme hike that it is sure to deliver.

Further, it is on record that even after 700 basis points of monetary pull back since December; consumer-price growth has increased for five months, reducing the inflation adjusted policy rate to about 1 percent. If this situation is to be the same in June, the central bank would have to raise costs to borrowers by another 400 basis points to stabilize the lira.

Around the world, Central banks have been forced into action by emerging-market instabilities. A significant example is Argentina hiking rates by 1,500 basis points last week; second is Turkey’s 10-year government bonds yield which has fallen for a second day, dropping to 20.91 percent and continuing its decline this week to 85 basis points.

Nomura International Plc has proffered a solution requiring Turkey to raise the one-week repo rate by at least 575 basis points to 23.5 percent; however, the company is unsure policymakers will be prepared to deliver such aggressive tightening.

Just as Guillaume Tresca, a strategist at Credit Agricole SA in Paris fears that increased rates are very imminent as he tips the lira lesser to 8.30 per dollar in December. He says: “Market expectations are now running high for a bold rate hike. In our view, they can only disappoint markets, very well the lira is weakening to 8.30 per dollar by December.” Guillaume lastly noted that the current stance by the central bank to this turmoil shows they are running out of ammunition.

Recently the lira slipped 0.3 percent to 6.6578 per dollar as of 10:29 a.m. in Istanbul on Tuesday. The currency went down as much as 2.6 percent on Monday before reducing the decline to a loss of 1.5 percent. Based on relevant speculations that hikes are looming, the central bank is to hold its next policy meeting on Sept. 13 to decide necessary actions to support price stability.

Further, It can be rightly inferred that with the amount of pressure on Recep Tayyip Erdogan the President to keep the growth moving along, it is not a surprise that investor skepticism over the acceptability of any policy action is running high. By allowing inflation go into the double digits for most of the past two years and relying on controlling liquidity management instead of immediate hikes the central bank has remained firmly in deficit.

Inan Demir, an economist at Nomura, says he is unsure of what to expect however he has subjected fate to Monday’s statement, he say: “I’m not very confident, to say the least, If Monday’s statement is a signal of unconventional policies, the market will be underwhelmed by the policy response.”

For comments and feedback: editor@bestratedirect.com

Filed Under: Bank Rates, Economic Rates, News, World

“The time for rates hike not right,” Bullard to Federal Reserve Bank.

September 5, 2018 by Jason Shortes

The Federal Reserve Bank of St. Louis President James Bullard admonished management members to halt raising rates again, however, Bullard appeared resolved that a move higher this month is pretty much a done deal.

The bank president while speaking in an interview on Fox Business Network on Tuesday complimented the economy saying: “we’ve got a pretty good policy right now and we should stay where we are and see how the data come in.”

Furthermore, the interest-rate setting Federal Open Market Committee is expected to sit later this month to increase the current rate to their target rate, whose current threshold is 1.75% and 2%. However, Mr. Bullard can do only little, as he is currently not a voting member of the committee.

Also, the president while speaking with Fox Business Network reiterated his view on rate increases; unluckily, his colleagues share a dissenting view about the looming September rate rise, in Bullard’s own words he says: “markets are putting a high probability on it. And if you talk to my co-workers, most of them seem to be speculating a high probability as well.”

The president of the Federal Reserve Bank also noted that the bond market is currently in good shape because the difference between short and long term dated yields has diminished considerably. Thus the favorable condition in the bond market is unsupported by raising rates at the moment. That is because more rate hikes could cause that relationship to turn negative, and if it did, that is a strong signal a recession may follow.

Putting in Bullard’s own words, he says: “We’re in good shape, and I think what we could do is take the signs from financial markets that are telling us that we’re almost where we need to be right now, for instance the yield curve, is very flat. I’d rather not see an inverted yield curve in the U.S. That’s usually a signal of a slowdown ahead.”

For comments and feedback: editor@bestratedirect.com

Filed Under: Bank Rates, Economic Rates, News

Rising ECB Rates? No problem for EU Finance Ministers!

September 4, 2018 by Jason Shortes

Europe’s finance ministers need not lose a sleep over the fact that European Central Bank’s exit after years of loose monetary strategy will provoke financial upheavals, an upcoming study says.

According to Daniel Gros the director of the Brussels-based Center for European Policy Studies, on his opinion to be presented at a meeting with central bankers and finance chiefs in Vienna on Friday, he rightly opt that “Higher interest rates do not need to be the forerunners of wider financial-market instability.”

A note from the nation’s government informs us that Austria, which currently holds the seat of Presidency in the EU, will ask delegates to consider rates normalization first, and lookout for any intervening strain it might cost the market and how to cub it.

However for Gros, the stop of market ad valorem and the ECB’s plan to raise rates very gradually, maybe starting in late 2019, will have both positive and some negative effects. The rise borrowing costs can reduce the central banks’ profits, which will eventually make their way into the government funds, but also prop up commercial banks’ balance sheets, which will be to support economic growth.

In his own words he said “Policy normalizing should not create financing difficulties for most government or major financial institutions, There is no reason to fear that policy normalization will lead to a sudden return of risk aversion and risk premia. Quite the contrary, a continuation of the ‘low for long’ scenario over time, might, lead to a build-up of vulnerabilities.”

Thus for Gros, putting off rate hikes for too long could lead to possible market problems down the line.

It is the earnest view that the ECB’s normalization is susceptible to promote financial stability at the global level even where some of Europe’s neighbors such as Turkey and Ukraine are vulnerable because European banks have little exposure there and any impact will likely be limited, Gros records same fate for euro banks in Asia as credit challenge loom could be a perilous factor.

For comments and feedback: editor@bestratedirect.com

Filed Under: Bank Rates, News, World

Argentina hoists Rates, Seeks IMF Aid to Save Peso.

September 1, 2018 by Jason Shortes

Just as Argentina faces her current currency crisis, this situation worsens on Thursday as an attempt to increase in the interest rate to 60 percent failed to stop shifty investors from repatriating their money from the country.

Just in, the Peso continues to record more landslides following the IMF increase in its benchmark rates by 15 percentage points to a global standard. The hike, being the second this month, marks the latest attempt by policymakers to revitalize the nation’s currency which has reduced to half of its value.

The President of Argentina, President Mauricio Macri, stunned the nation after a recent appeal to the IMF for quicker payouts of funds, the International Monetary Fund also responded to be considering the request at the moment.

Recently the peso fell to 20 percent against the dollar but is presently pegged at about 12 percent against the dollar at 3:05 p.m. in Buenos Aires, this marks Macri’s worse loss since he took office in December 2015 and consist of few of the vagaries of the crash that led to nation’s current debt and social upheaval almost twenty years ago.

However, a strong indication of the current nation’s financial plight envisaged in the days of Macri’s friendly-market policy where mindful Investors believed that the path taken by the president, who came to power after more than a decade of budget-busting populism, may lead the nation into inflation and economic depression.

Macri has raised hopes as he promised a slow but guaranteed cure to the crisis, but these hopes seem to be gradually fading away.

London-based leader of emerging market sovereign debt Edwin Gutierrez at the Aberdeen Standard Investments said: “The market isn’t giving them a choice, It’s forcing them to get it over with.’’

Just like Turkey, the present crisis in Argentina has sent shocking waves through other emerging markets being the bedrock of them all. Italy’s lira, on the other hand, fell almost 3 percent on Thursday. Also, currencies ranging from South Africa to Mexico also recorded losses. Brazil’s central bank intervened to shore up the real with more swap auctions.

The South American nation also holds the accolade of securing the highest IMF loan in history, a $50 billion credit sum agreed back in June.

Before 2001, Argentina had a viable foreign-debt record accompanied with a decade of significant shutdown in global finance, thereafter its debts inflated in which the South American nation has stalled its creditors eight times in the two centuries since it’s independence from Spain.

In 2015, Argentina saw the light briefly under Macri, whose victory was hailed by foreign investors and U.S. policy-makers, but this was nothing less after several changes of offices by policy-makers in the following decades.

The Argentine president is due to seek re-election in October next year, but the economic facet to his campaign is not a prospect.

So far, Inflation has stuck above 30 percent more is expected on a weaker peso. The thought of this becomes more factual as, before the latest slump, the Argentine government had promised 1 percent shrink in 2018, a sharp contrast to the 3 percent growth that was anticipated at the start of this year.

Paul Greer, a money manager at Fidelity International in London, showcases his clairvoyance as he said: “Argentina is headed for a hard landing recession in the next 12 months that will put Macri under pressure” as noted in an email.

Then again, is the government Out of Time?

The government’s was to reduce the budget deficit, lowering the issue from 6.5 percent of the GDP to 5.1 percent this year, and 3.8 percent in 2019.

More extreme cuts are now likely. Nicolas Dujovne Treasury Minister told reporters late Wednesday that the government is working on a plan to reduce the fiscal deficit faster so that it can lower borrowing.

Secondly, the IMF is a major player, its current consideration of President Macri’s request for major disbursements is a determinant.

Aberdeen’s Gutierrez consider the hastiness of this agreement as he noted: “They said this IMF agreement will be ready in a few weeks, do they have a few weeks? I’m not sure they do.

For comments and feedback: editor@bestratedirect.com

Filed Under: Economic Rates, News, World

Current Hike in Mortgage Rates

August 31, 2018 by Jason Shortes

The rates for home loans have incredibly gone higher as investors halt interest in safe-haven assets, more so the present decline in the housing market may negate credit facilities to potential housing customers.

A weekly survey by Freddie Mac, evaluates a 30-year fixed-rate mortgage averaged at 4.52% in the Aug. 30 week, after reaching its lowest point since mid-April. More so the 15-year fixed mortgage rate, averaged at 3.97% down from 3.98% while the 5-year Treasury-indexed adjustable-rate mortgage averaged 3.85%, up three basis points.

Furthermore, Bond prices have been under the rise in the past few weeks, and consequently, current trade deals and a potential German lifeline for the Turkish currency crisis reduced the demand for safe-haven assets.

It is trite that Bond proceeds rise when prices fall just as Mortgage rates align the trajectory of the benchmark 10-year Treasury note TMUBMUSD10Y, -0.94 %.

While the boom in the current housing sector deteriorates, the sale of previously-owned homes has declined mainly than in the last two years, just as the fittings and furniture market experienced better sales conditions; however, a ratio that measures the inventory rose in July to one of its highest post-crisis readings.

Buyer’s hope clings on as Americans show little interest to be homeowners, this is revealed by Showing Time report, which in a bid to create appointments for buyers to tour homes put up for sale, developed statistics that aggregate traffic information based on those findings. According to the company’s report, this figure fell flat in July, unlike the last year.

This year, according to statistics reached by the Mortgage Bankers Association, the housing market records an average mortgage application to purchase homes at 3.6%, this has been higher than the same period in 2017, however mortgage applications for refinancing show to be 17.5% lower on the average.

The chart shows MBA’s index of purchase applications. Even the fall in the number of applications shown in the past few weeks is still higher than the figures last year.

For comments and feedback: editor@bestratedirect.com

Filed Under: Mortgage Rates, News

Weekly Mortgage Applications Decline, Although Rates Drop

August 30, 2018 by Jason Shortes

According to the report released by the Mortgage Bankers Association, the entire mortgage application volume reduced by 1.7 percent last week but the volume’s value was 15 percent lower in the previous year. A reduction in the mortgage rates should have bolstered the mortgage business, but the reverse is the case in this scenario.

In this summer, dwindling affordability is a significant factor that has restricted the potential homebuyers, and this is affecting the mortgage market adversely. There was a decrease of the average contract interest rate for 30-year fixed mortgage rate with conforming loan balances of $453,100 or less from 4.81 percent to 4.78 percent, the lowest rate since the end of week which ended on July 20, with increasing points from 0.42 to 0.46 which also include the origination fee for loans with a 20 percent down payment.

According to Joel Kan, an MBA economist, he said that the treasury returns were significantly lower over the week, due to an FOMC release which states that Fed officials may be considering a more careful strategy to the final two anticipated rate increases of 2018. In the previous week, there was a three percent decrease in the applications to refinance a home loan, an application which is known to be sensitive to rates. However, the volume was 33 percent lower per annum, as the interest rates were noticeably lower in the previous year.

The home purchase mortgage applications also reduced by one percent for the week. The volume was three percent greater than the similar week last year but expected to be higher when the strong demand and improved economy are considered. The home price is the main issue in this aspect as most buyers cannot compete in most of the major markets, and they are withdrawing from the race. There is an increase in the prices of homes, but the speed has slackened in the last few months as some sellers stay on the market for an extended time. Despite that, the prices are not decreasing on a national scale, and there is no sign of diminishing in the presence of strong housing demand.

According to Aaron Terrazas, a senior economist at Zillow in an interview on CNBC’s “Power Lunch” on Tuesday, he said the appreciation of home value has reduced, but its present state is three times its historic pace and triple the wage growth’s rate. He also opined that it remains a seller’s market and will persist to be a seller’s market until there is an intense change in interest rates or inventory.

The mortgage rates are under severe burden in this week because the return on the ten-year US Treasury bond, which they slackly follow, is increasing again. In this summer, rates have moved within a narrow range, but they are exhibiting signs that they could start to soar higher.

Filed Under: Mortgage Rates, News

Canada’s Hot Economy Tests Canadian Banker Poloz’s Patience With Canadian Rates

August 30, 2018 by Jason Shortes

With the pushing of protectionism from President Trump, the biggest obstacle to the economic expansion of Canada is within its borders. Local news emanating from Canada confirmed that the economy of Canada is closer to overheating than stumbling on the back of trade uncertainty, a situation that has compelled the Bank of Canada to introduce higher interest rates.

There is an anticipated report from Statistics Canada that the economy increased to an annual three percent rate or more in the second quarter, a feat considered as the fastest stride in a single year. It is believed to serve as a balance for the weaker start to 2018 and create more space for expansion for a profit of a rate higher than two percent for the entire year after 2017 strong 3.1 percent advance.

This huge demand is unraveling the little capacity possessed by the economy. The companies in the country are faced with a shortage of labor and production constrictions, as the inflation rate of three percent is the maximum when the Group of Seven is studied.

According to the Chief Financial Officer of the Royal Bank of Canada, Rod Bolger in a telephone interview in the previous week opined that trade uncertainty is on the mind of everybody, but there is a strong demand. The challenge faced by several clients of the Royal Bank of Canada is the sourcing of labor as it is hard to get skilled professionals and the upward pressure on labor rates cannot be ignored.

However, the tightening signs are visible as the rate of unemployment is presently at four-decade lows, improvement of pay raises, and the increase in the number of job vacancies by different companies. According to the information shown by the job listings, various businesses are offering thousands of dollars to hairstylists and mechanics in the form of signing bonuses.

Over the years, Canada has exclusively depended on the immigrants to develop its working population as its entire population advance in age. Statistics Canada released a report that in the last one year, the population of landed immigrants in the labor force was increased by 164,000 and down 72,000 for individuals that were born in Canada.

According to the economists at the Bank of Canada, the economy of the nation is expected to grow more than two percent before the emergence of inflation. This is the main reason why financial markets are not focused on the swiftness of the expansion but the pace of the rising rates and its amount. In the words of Jean-Francois Perrault, the Chief Economist at the Bank of Nova Scotia, he said that every company is complaining about the shortage in labor and confirmed that the issue of labor is the most complicated problem faced by several businesses at the moment.

In a bid to ensure a breakthrough on trade would provide relief for parts of the capacity restraints, it has been observed that brands are incapacitated in the aspect of demographics, but they can resolve labor shortage issues by purchasing more equipment and embracing new technologies. However, more trade certainty should reinforce their belief and enthusiasm to invest which will encourage them to offer increased wages that will attract more individuals into the workforce.

In the real sense, there is least expectation of investment revitalization in Canada that could overturn the entire growth trend. The reason is that businesses are careful of overstretching themselves in the Canadian economy that is presently experiencing a slowdown.

The desire of the Canadian Prime Minister, Justin Trudeau to increase immigration will offer relief significantly, but this issue will be a controversial topic in the political sphere. Research has shown that the influx of more immigrants is not the perfect solution as they may not be as productive as the persons they replaced. These factors could leave companies in a tight corner in the future as they may struggle to keep up with demand thereby stimulating inflationary pressures.

Investors see close odds that the Bank of Canada will increase borrowing costs for the fifth time by October, since the hiking cycle started in July 2017 with several increments and two additional increases by the middle of 2019. The models of the central bank stayed behind the curve on regularizing borrowing expenses from traditionally low levels, but the Stephen Poloz, the Governor of Bank of Canada, has believed that there is still some floppiness in the labor force, especially among the women and the youth, which could be attracted with lesser rates.

Economists do not entirely believe in the assertion that supply is the most significant obstacle in Canada, one of the advanced economies in the world. They opined that the companies could be making a capacity investment because demand is suppressed by other factors such as a debt extension or imbalanced wealth distribution. However, an increase in the rates may not be the perfect solution if demand is the cause of the issue.

With the availability of few options for the Bank of Canada, as its primary assignment is to confront inflation, and not focus its energy on structural challenges like production constraints and income inequality. The patience of Poloz is being tried with the inflation at a full percentage point beyond the two percent target.

For comments and feedback: editor@bestratedirect.com

Filed Under: Bank Rates, News, World

German and Swiss Lenders Change Of Plans on Negative Rates

August 29, 2018 by Jason Shortes

As a result of the recent negative deposit rates levied by the central banks in the region, some smaller banks in Switzerland and Germany are presently finding it hard to provide the appropriate answers to the situation. In the last few days, various lenders have made a pronouncement of new policies. The penalty in the form of interest on the savings of private customers was either presented, modified or annulled.

In the case of the PostFinance AG in Switzerland, the penalty interest was introduced. A levy was placed on account balances of 500,000 francs or exceeding the amount by October 1. However, the limit previously used was on account balances in the region of one million francs. The levy is equal to one percent of the money that surpasses the threshold.

According to the spokesperson of PostFinance, Reto Kormann in his interview with Bloomberg, he confirmed that PostFinance had received more than five hundred million francs in client funds in the last one year even though the financial institution is not paying any interest. He said there is a need to stiffen the fee regime to stop the resilient new money inflow and achieve an outflow of the funds of the customers. He also said that PostFinance, as a state-owned financial institution is not permitted to borrow money on its volition thereby making a few products available to counterbalance the inconvenience of negative interest rates.

On the other hand, Hamburger Sparkasse AG, which will soon be introducing its penalty interest levies, also explains its resolution with higher expenses for liquid funds. According to its spokesperson, Stefanie Von Carlsburg said if their customers store huge deposit cash in their checking accounts, it will have financial implications on the daily operational cost of Haspa. She said a valuation of the low-interest environment’s burden in recent years was calculated to be a high double-digit million euro per annum.

Carlsburg confirmed that a levy of 0.4 percent would be placed on private savings of 500,000 euros or more by the lender starting by September. She even said that the levy does not take care of the expenses earned by the ECB’s penalty rate for bank deposits as they have to offer payment for deposit insurance. According to the information released by the German Savings Banks Association, the lender was the biggest savings banks by assets in 2017 in the whole of Germany.

In contrast to the Haspa’s policy, Hamburger Volksbank eG has resolved to revoke its 0.2 percent penalty rate, which was announced in the first phase of 2017 for individual account balances of 500,000 and more in some accounts. According to the spokeswoman of Hamburger Volksbank eG, Heidi Melis, she said that customers who were affected by the policy moved their cash from their respective accounts as time goes by. This led to the presence of a few clients with a balance of 500,000 euro, and the bank chose to abolish the penalty rate. The cash flows will continuously be checked to see how it will evolve in the future.

Most lenders will repay the money they acquired from central banks. However, the European Central Bank has a deposit rate of minus 0.4 percent, and the Swiss National Bank deposit rate is currently at minus 0.75 percent. Pushing these expenses to the corporate clients by compelling them to pay the penalty interest is not an uncommon occurrence, but this step is the concession for private clients in the area.

For comments and feedback: editor@bestratedirect.com

Filed Under: Deposit Rates, News, World

Mortgage Rates And Short-Term Interest Rising At The Same Time: Meaning For Real Estate Investors

August 29, 2018 by Jason Shortes

A surge in short-term interest rates will lead to higher mortgage rates. This is a factual statement, but the valuable consequences for the real estate investors may not be significant. In the United States, the body that controls the activities of the entire banks in the country is called the Federal Reserve System. It is the sole central bank that operates with a centralized banking system. In most cases, it is often referred to as the Federal Reserve or the Fed.

The primary focus of this write-up is the Federal Open Market Committee, which is an integral part of the Federal Reserve. The FOMC comprises five Federal Reserve Bank presidents and seven governors of the Federal Reserve Board. The Federal Open Market Committee conducts its meetings eight times annually. Interestingly, the outcomes of these meetings are waited upon by each financial expert, every financial institution, and each stock exchange. The reason is that the monetary policy of the United States is determined at the committee meetings, and this invariably regulates the activities of each financial institution in the United States.

For instance, a significant tool utilized to regulate the market is the consolidated short-term interest rates given to the banks by the committee. These interest rates are the approved rates at which banks are permitted to offer each other short-term loans. This rate is the recommended rate that the Federal Reserve trades money to the financial institutions, and the banks will simultaneously sell to the people who are their customers. In precise terms, the short-term interest rate can be defined as the cost of money as it determines the value of the other interest rates in the financial industry of the United States.

Most often, the short-term rates are reduced or increased when the Federal Open Market Committee resolves that the presence of national economic situations permit or demand to raise the rates. In a research conducted by OECD, short-term interest rates got to a historic height in the early 1980s, reaching more than 18% per year, and are currently within the range of historic lows in the United States. According to a report by Freddie Mac, it is essential to observe that the highest short-term rates in the United States matched with the highest mortgage rates as a historic high of 18.63% of mortgage rates was reached in 1981.

For comments and feedback: editor@bestratedirect.com

Filed Under: Mortgage Rates, News

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