Are Global Interest Rates Headed to Zero?
Lower for longer?
There has been a lot of buzz in the
financial sector about the movement of interest rates in the world. In
the global recession of 2008, interest rates saw a significant decline
to stimulate the economy. Zero to below rates proliferated in that era
to encourage people to spend.
This year, the talks revive anew as
economy seems to slow down again. Central banks in New Zealand,
Thailand, and India cut interest rates, with Australia believed to
follow suit. It’s indicative of slowing growth on a global scale, notes
professional investor Damon Vickers from New York, which could likely negatively affect rates.
The Present
In Europe and Japan, interest rates are
below zero, which means consumers and businesses pay in order to deposit
cash. Some experts believe that US might reach the negative end of
prices, too, mainly since the US-China trade war is still a thing amid
ongoing talks between the powerhouses.
While the world is still waiting for the
Fed’s next move, the biggest question now is whether global interests
are headed to zero. Damon Vickers
believes that there is a 70% chance that the Federal Reserve might do
another cut in December even with an apparent slash happening sometime
in the last week of October.
The next moves of the Fed can affect the
international market as a whole. Such rate reductions mean to stimulate
the global economy to combat its slowing growth. It’s also timely since
the Christmas season, one of the busiest in terms of market movement is
coming.
Damon Vickers warns about the perils
The economy is slowing down, but there
is no need to worry about the Great Recession happening again, according
to Vickers. There are many factors to consider, including weak
productivity growth and the aging population not only in the US but in
other parts of the world.
Consumers might be taking the winning
end of the stick, what with lower monthly costs for purchases like cars
and houses. Businesses and borrowers can also benefit from it, but for
every positive, there is an opposing downside to it.
“Easy money can be attractive, but also exposes consumers and businesses to economic stresses in the long run,” notes Damon Vickers. For instance, ATM fees and overdraft charges might increase due to slimmer profit margins for banks.
However, tension from early this year,
such as the Brexit decision and trade wars, has significantly calmed
down. This turn of events might mean the world is yet to experience
negative rates for now.
Comments
Post a Comment