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Central bank interest rates are an incredibly interesting topic. That’s because the interest rates charged by central banks dictate so much. They play a role in the value of the currencies they represent, they cause movement in entire economies, and they send markets for a ride. So, it’s important to keep a close eye on where global central bank interest rates are headed. Today, we’ll talk about what we’re seeing from central banks in key regions around the world and where rates are likely headed throughout the year 2018.
What We’re Seeing From Key Economic Regions
Central bank movements thus far this year have been incredibly interesting. This is particularly the case in the United States and the United Kingdom, where debates surrounding central bank interest rates seem to be heating up by the day. Here’s what we’re seeing:
While the United States Federal Reserve has increased its Federal Funds rate a few times since it’s long stretch at a record low 0.25%, the rate is still at incredibly low levels. In fact, the current Federal funds rate is just 1.5%.
Nonetheless, the Federal Reserve has said that it intends on continuing small rate increases, likely periodic increases of 0.25%, throughout the year. In fact, it is expected that the Federal Funds rate will undergo 3 increases throughout the year 2018. If this is indeed the case, by the end of the year, the Federal Funds rate in the United States will be at least 2.25% by the end of the year 2018.
The UK is also facing a need to increase its interest rate. While many feared that the UK would suffer as a result of the Brexit, things seem to be picking up in the region. In fact, the economy has seen an accelerated rate of growth due to booming global growth in demand for UK products. As a result, the Bank of England recently signalled that an interest rate increase would be coming, and that it would be happening relatively soon. In fact, many expect that the first rate hike from the current 0.5% rate, will take place in the first half of the year. In a recent statement, the Bank of England’s rate-setting monetary policy committee, or MPC, recently had the following to offer:
“The outlook for growth and inflation [is] likely to require some ongoing withdrawal of monetary stimulus.”
Ultimately, low interest rates serve as monetary stimulus by increasing the demand for loans. These loans then flood the economy with funding that fuels further growth. So, the above statement, stating that the Bank of England will withdrawal monetary stimulus is a direct statement that interest rates are likely going up in the region very soon.
Commenting on the recent trend in central banks pointing toward interest rate increases Alon Rajic, CEO at MoneyTransferComparison.com, had the following to offer:
“We are starting to see more activity in money transfers, specifically from the United States and United Kingdom regions. Our analysts are noticing a strong correlation between mentions of rate hikes from central banks around the globe and further expectations of monetary expansion leading to economic growth and a stronger demand for both domestic and international transfers of funds.”
What We Can Expect From Rates Throughout 2018
Throughout the year 2018, economic projections show a continued expansion in various developed nations around the world. In particular, multiple rate hikes are expected in the United States and United Kingdom throughout the year. While we recently saw a rate hike out of Canada, many also believe that more hikes are coming in this region as well. At the end of the day, the expectation is that throughout the year, interest rates will continue to rise as global economies continue to expand.
