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What influences forex interest rate decisions?

Jul 29, 2020 at 08:33
512 Views
7 Replies
Member Since Jul 09, 2020   20 posts
Jul 29, 2020 at 08:33
A number of factors influence interest-rate decisions. It can generally depend on one central bank to another. Central banks usually have mandates. The mission can be to preserve price stability or to guarantee low unemployment.

For example, the U.S. Federal Reserve Bank has a dual mandate to maintain inflation and jobs. Recently, New Zealand’s Reserve Bank also began a dual mandate.

Therefore, depending on the central bank, variables may change.

Generally, a central bank begins determining the inflation rate it wants to target as well as the unemployment rate. Then it can continue affecting interest rates.

With low rates, the central bank encourages economic borrowing. This increases job creation and demand. As demand rises, you can see this demonstrated by increasing GDP, lower unemployment.

When GDP and unemployment rate are on target, that gradually raises inflation. Higher inflation arises as investors buy more commodities. Higher demand leads to higher prices.

To combat inflation, the central bank must raise interest rates. In addition, lower demand for commodities pushing down inflation. By doing so (higher interest rates and lower interest rates), the central bank can maintain or attain inflation and unemployment rates
Member Since Dec 15, 2019   20 posts
Jul 30, 2020 at 16:04
I like the way you explain it. You've really managed to unravel the answer to the question. In fact, there's so much information around us right now that it can be hard to find the right and the accurate one. That's why I love this forum so much. It's a place where people can explain in their own words the hardest things in a way that you can understand them)
Member Since Jul 23, 2020   869 posts
Jul 08, 2021 at 13:08
Thanks for sharing your knowledge with us.
Member Since Jul 23, 2020   759 posts
Aug 07, 2021 at 16:41
US Federal Reserve is one of them which influences forex interest rate decisions.
Member Since Nov 02, 2021   73 posts
Nov 23, 2021 at 04:35
Different countries have different interest rates, which in turn affect the exchange rate between currencies over time. This is because interest rates affect the demand for currencies, which in turn affects their value. Easier access to loans means more people are likely to borrow money to spend, which should cause the value of a currency to rise.
Member Since Apr 09, 2019   538 posts
Nov 24, 2021 at 11:27
ONly country at the moment doing anything with their rates is NZ! You would think the others will follow soon
If you can't spot the liquidity then you are the liquidity.
Member Since Mar 17, 2021   536 posts
Nov 26, 2021 at 18:52
tts_markets posted:
A number of factors influence interest-rate decisions. It can generally depend on one central bank to another. Central banks usually have mandates. The mission can be to preserve price stability or to guarantee low unemployment.

For example, the U.S. Federal Reserve Bank has a dual mandate to maintain inflation and jobs. Recently, New Zealand’s Reserve Bank also began a dual mandate.

Therefore, depending on the central bank, variables may change.

Generally, a central bank begins determining the inflation rate it wants to target as well as the unemployment rate. Then it can continue affecting interest rates.

With low rates, the central bank encourages economic borrowing. This increases job creation and demand. As demand rises, you can see this demonstrated by increasing GDP, lower unemployment.

When GDP and unemployment rate are on target, that gradually raises inflation. Higher inflation arises as investors buy more commodities. Higher demand leads to higher prices.

To combat inflation, the central bank must raise interest rates. In addition, lower demand for commodities pushing down inflation. By doing so (higher interest rates and lower interest rates), the central bank can maintain or attain inflation and unemployment rates
Very informative post. thank you for the post.
Member Since Mar 28, 2021   617 posts
Jul 26, 2022 at 13:32
Scalpers can rely on technical analysis as they try to consume small lots but long term traders should focus on fundamental analysis because only fundamental analysis can serve them an exact market forecast.
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