This week we will review the levels of interest rates and try to give a perspective on long-term interest rates and their impact on the markets.

 

 

We will start off with a short description of the FED interest - the U.S. central interest rate that is set by the FED is the interest rate for loans between banks and the Federal Reserve banks. This rate is known one and currently stands in the range between 0% -0.25% as of December 2008. The FED interest rate between the FED and the banks is called the Discount Rate and is currently at 0.75%, during the crisis it fell to 0.5% and in February 2010 rose back to 0.75%.

 

So what does interest rate affect? Is the level of inflation? The currency rate or on the curve?
All tests have been done in our office we, if the central bank governor is reading this review, you should not rely on this data to determine monetary policy.

The relationship beteween the FED interest and the Dollar index (against 6 major currencies)

Red line – FED interest rate, Blue line – Dollar against other currencies

 

Red line – Unemployment rate, Blue Line – FED Interest Rate

By determining the monetary policy, the FED considers coreinflation (excluding food and energy)  and not the

overall economy.

FED Interest Rate VS the Core Inflation

 

FED Interest Rate VS the 2-10 Curve

 

 

Back to 60 seconds on...