Sunday, November 22, 2009

Outlook for interest rates

Zero interest rates currently works as a relatively strong attraction for investors who are borrowing cheap dollars and turning into purchases of shares and commodities.

What happens on the next FED meeting nobody knows but general expectation is unchanged interest rates until summer 2010. The Federal Reserve may start raising interest rates on June. This comes from the results of the Fed Funds futures. Currently traders give 54% chance to increase the minimum rates by 0.50 basis points. The increase is estimated could take place at the regular meeting, scheduled for 23 June 2010.

The increase in interest rate markets are generally perceived as a strongly negative element, but this time it could be consider differently. That would mean that the Fed feels confident about the economy, as well as the financial system is strong enough to withstand higher interest rates. It would be a positive for equity markets. Australia has recently experienced something similar. Local central bank after a long pause decided to increase the lowest interest rate for the past 49 years from 3% to 3.25%. Australian S & P / ASX 200 responded by the increase of 1.8%.


1 Response to "Outlook for interest rates"

Anonymous said... December 13, 2009 at 5:53 PM

now I stay in touch..