And floating and fixed exchange rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).

Thus, the exchange rate regime in Latin America today is one of actively managed floating.

But the continuing success of the floating exchange rate system does not imply a smooth ride in 2011.

Managing a floating rate has also allowed Latin American countries to accumulate a significant level of international reserves.

Nearly all mortgages have floating rates that vary with the five year loan rate set by the People s Bank.

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways. Thus, the exchange rate regime in Latin America today is one of actively managed floating.

First, China needs capital controls to retain monetary policy independence until it is ready to adopt a floating exchange rate regime.

In the United States, this interest rate is the federal funds rate in the United Kingdom, it is the official bank rate.

Coming from different experiences, most countries converged on the adoption of a floating exchange rate, many in the context of inflation targeting.

So the Fed could, in principle, decide to raise the federal funds rate even before the unemployment rate reaches 6.5 .

In May 2006, the fairly free domestic interbank rate was just 1.62 , while the US Federal Funds rate was 5 .

The floating exchange rate system works surprisingly well, but currency volatility and unpredictability look likely to remain an enduring constant in 2011 and beyond.

In this case, the price of loanable funds is the real interest rate.

Floating point exception

BEIJING On October 26, the renminbi s spot exchange rate against the US dollar reached the upper limit of its floating range for the second consecutive trading day.

Me was a floating head.

Floating market, Colombo, Sri Lanka.

By the lone stars floating ,

Farmers and wholesalers gather in several floating markets in a region that resembles the floating market of Thailand.

Indeed, a third lesson is that neither hard pegs nor unfettered floating facilitate the preservation of a competitive real exchange rate, which is crucial to promoting and sustaining economic development.

The effect of quantitative easing on exchange rates between the dollar and the floating rate currencies is a predictable result of the Fed s plan to increase the supply of dollars.

In developing countries alone, pension funds, insurance companies, and mutual funds hold assets worth more than 6 trillion, and these assets are growing at an annual rate of 15 .

With floating exchange rates, it is not.

Turned to dust , floating in the air ,

Turned to dust , floating in the air ,

But what most characterizes Latin America s experience is that, despite publicly preaching the virtues of a floating rate, the authorities actively intervene in currency markets, this time in different and creative ways.

First, the Fed is trying to give relatively specific guidance about the future path of the federal funds rate (the overnight rate at which commercial banks lend to each other).

The Fed pumped money into the US economy and slashed its main interest rate the Federal Funds rate from 3.5 in August 2001 to a mere 1 by mid 2003.

So that they will become floating dust particles .

So that they will become floating dust particles .

The Fed could, in principle, limit inflationary lending by raising the interest rate on excess reserves or by using open market operations to increase the short term federal funds interest rate.

Surplus Chinese savings made possible America s credit expansion between 2003 2005, when the federal funds rate (the overnight rate at which US banks lend to one another) was held at 1 .

The Fed warns that it might increase the federal funds rate if the anticipated annual inflation rate rises from its current level of a bit less than 2 to more than 2.5 .

The increase in the household saving rate reduces America s need for foreign funds to finance its business investment and residential construction.

They got little babies in there, floating in there.

Sami's lifeless body was floating in the swimming pool.

But flexibility is not a synonym for pure floating.

A common application is removing oil floating on water.

By contrast, a more needy Louisiana (with its staggering 24 poverty rate) was denied its request for flood mitigation funds in 2004.

That could lead international investors to withhold funds from a departing country and raise substantially the interest rate on its national debt.

Shamsheer writes in Somewhereinblog about the floating markets he visited

With unemployment now at 7.6 and falling only slowly, the Fed may not be ready to raise the federal funds rate until 2015.

And that is important, because a rise in the federal funds rate will cause other, somewhat longer interest rates to increase as well.

This would be a particular problem for the US, where the Fed allowed the Federal funds rate to approach zero in January 2009.

(The Fed raised its benchmark federal funds rate from 1 in 2004 to 5.25 in 2006 and held it there until August 2007).