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What influences forex interest rate decisions?

Member Since Jul 09, 2020  9 posts TTSMarkets (tts_markets) Jul 29 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  10 posts Dorofeev Jul 30 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)

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