Interest

To define an interest rate fully, allowing comparisons with other interest rates, both the interest rate and the compounding frequency must be disclosed.

Interest Rates

The Business Case for Europe s Refugees

What good will that do?

The Trouble With Interest Rates

When Interest Rates Rise

China s Interest Rate Challenge

The Real Interest Rate Risk

Interest rates are already low.

The Long Mystery of Low Interest Rates

Second, China s central bank still controls interest rates by enforcing a roughly three percentage point spread between deposit rates and lending rates.

This ratio is called the mechanical advantage.

Central banks respond to lowered demand by reducing interest rates and to higher expected inflation by raising interest rates.

A Good Rate Hike for Europe

America s Interest Rate Puzzle

How Long for Low Rates?

US Interest Rates Will Continue to Rise

The difference in payments is called interest.

This means that real interest rates interest rates measured in terms of goods and services have stayed the same.

The second adverse effect of deflation is to raise the real interest rate, that is, the difference between the nominal interest rate and the rate of inflation.

The Fed is engaged in the difficult task of trying to set not just the short term interest rate, but longer term rates as well.

Slow Growth for US Interest Rates

Lower interest rates are not a solution to this dilemma.

An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

But real interest rates did not fall enough, because nominal interest rates cannot go below zero.

Investors are buying long term bonds at the current low interest rates because the interest rate on short term investments is now close to zero.

Under the current system, the fixed differentials between interest rates on deposits and those on loans translate into monopolistic profits for commercial banks.

In this case, the price of loanable funds is the real interest rate. An expectation that interest rates will be high sometime in the next decade should mean high interest rates on long term bonds today.

For example, the classical prohibition on usury was softened from a ban on charging interest on all loans to a ban on charging interest on loans for which the lender had no alternative use, i.e., for charging interest on hoards or cash balances.

Emerging Markets After the Fed Hikes Rates

Do Low Interest Rates Ensure High Asset Prices?

Interest rates on government debt are still low.

Ultra low interest rates may persist for some time.

First, the local entrepreneur serves as a role model.

That is all there is to their usefulness.

The benefit is therefore modest.

In Brazil, interest rates remain close to 11 .

What Use Are Economists?

Both were reluctant to lower interest rates markedly.

Bondholders gain when interest rates fall.

Italy, however, chose to squander that interest rate advantage.

Reserves of foreign currency provide a small return in interest.

This will change, however, once the economic pick up is confirmed. Interest rate hikes may be coming sooner rather than later, which is why Berlusconi and French President Jacques Chirac are talking up interest rate cuts now.

The combination of economic recovery and lower interest rates would produce a virtuous dynamic in which falling interest rates and a rising budget surplus are mutually reinforcing.