The result is that overdraft credits to the Greek central bank have grown by nearly 1 billion a day in recent months. If Greece defaults and leaves the eurozone, these overdrafts will not be repaid.

China s Interest Rate Challenge

The Real Interest Rate Risk

America s Interest Rate Puzzle

And it is the real interest rate not the money rate that counts for economic growth.

Lower interest rates are not a solution to this dilemma.

China and India Exposed

C. Interest rate applicable to lump sum commutations

a London Interbank Offered Rate.

Because the inflation rate is also about 2 , this implies a negative real interest rate, which is confirmed by the interest rate of 0.6 on ten year Treasury Inflation Protected Securities (TIPS), which adjust interest and principal payments for inflation.

At present, the interest rate is less than 0.5 .

As a result, the interest rate for 12 month fixed deposits has reached 3.9 .

According to the followers of Knut Wicksell, the central bank must keep the market rate of interest near the natural rate of interest.

Voilà a successful short trade.

Shorting Fiscal Consolidation

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.

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

Domestic deflation means that the real interest rate on Japanese bonds is higher than the nominal rate.

Foreign investors then sent their money to New York to take advantage of the higher rates.

1. Raised the interest rate for lump sum commutations from 4.5 to 6.5 per cent.

The representatives of executive heads favoured retention of the current 6.5 per cent interest rate.

But the interest rate that Greece must pay buyers of its government bonds has shot up to a record high level of nearly 9 5.9 percentage points above the benchmark rate paid by Germany.

At that time, the Board decided not to reduce the interest rate from 6.5 to 5.5 per cent, as had been proposed by the participants apos representatives it agreed, however, to review the rate on the occasion of the next actuarial valuation of the Fund.

But when prices are falling, the real interest rate exceeds the nominal rate.

In Japan, the ten year rate has drifted to below 0.8 .

And, due to rising consumer prices, the nominal interest rate will continue to rise.

The Federal Reserve has cut its key interest rate to the lowest level...

During 2001 the interest rate was lowered from 6.5 to 1.75 .

The relationship between today and tomorrow, today and the future. And that interest rate we'll assume is positive.

2. Raised interest rate for lump sum commutation from 4 to 4.5 per cent.

However, this is no longer applied since the central bank started changing rates by 0.25 percentage points on October 19, 2010 (which was a rate increase).

Equally, a reduction in interest rates frees up space in the budget for increases in social expenditure.

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

All the above assumes that the interest rate remains constant throughout the whole period.

And that 100, because the interest rate is positive, will be part of this 110.

Past experience implies that the real rate will rise to at least 2 , taking the total nominal interest rate to more than 4 , even if expected inflation remains at just 2 .

Since the interest rate set by the ECB is now less than 1 , there is little difference between its current monetary policy and what the Bank of Spain would do if it could set its own interest rate. But when the euro zone starts to recover, the ECB might choose to raise the interest rate before a higher rate would be appropriate for Spain, which could exacerbate Spanish unemployment.

Indeed, the interest rate on inflation protected bonds has now become 0.5 , even for a five year maturity!

Given today s exceptionally low long term interest rates, the annual cost would be, well, peanuts.

During the discussions in the Board, the participants apos representatives took the position that the current interest rate of 6.5 per cent was high, taking into account recent developments in the levels of interest rates and current market conditions.

Thus, the market can establish the necessary interest differential only if interest rates on yuan assets fall below their dollar equivalents.

So, if the PBOC sets the interest rate on one year deposits at 3 , commercial banks can offer depositors a rate as high as 3.3 .

When the economic recovery begins to accelerate, commercial banks will want to use the large volume of reserves that the Fed has created to make loans to businesses and consumers.

This is intended to stimulate private spending by bringing down the rate of interest at which banks lend to their customers.

Yes, there is a minus sign in front of that if you buy the five year TIPS, each year over the next five years the US Treasury will pay you in interest the past year s consumer inflation rate minus 1.02 .