HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

Interest rates: why do they matter so much?


There is nothing new about it. You’ve heard about it. We’ve heard about it. The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan… a common term? Of course, interest rates. That’s totally right. But why do they matter in Forex trading?

No worries. There is no shame in asking. Actually, it is better to get on with these things before you end up watching a screen full of candles going up and down the chart and realising you understand ZERO about what is going on.

Interest rates are relevant to Forex traders because they are probably one of the most influential factors central banks use to control the economy. When they set their monetary policy, an interest rate dictates whether they are supporting it or letting it ride on its own.

Last week, the Federal Reserve decided to keep its benchmark rate in a range between 1.25 percent and 1.50 percent, while reassuring its forecast of three rate hikes for 2018.

The US regulator has already started what is commonly described as a “monetary normalization process”, which in other words means reducing monetary stimulus and letting the economy runs on its own without intervention. An intervention that was needed following the 2008 crisis.

Interest rates are a useful way to keep the economy running healthy, without overheating or getting cold. Rates can help pair growing inflation or prevent deflation (like in the EU).

Due to the close relation between interest rates and inflationary pressure, measures such as the Consumer Price Index (CPI) or the Personal Consumption Expenditures (PCE) are carefully monitored by policymakers in order to justify rate adjustments.

In the United States, labor market conditions also play an important role in defining the monetary policy configuration and its development.

Important to understand:


Rising interest rates: increases the cost of borrowing money (credits), pushing consumers and business to spend less and therefore, slowing down the economy. The dollar benefits from this scenario because people tends to sit on their savings.

Lowering interest rates: reduces the cost of borrowing money, pushing consumers and business to take more credits and therefore, accelerating economic growth. The dollar falls in this scenario because people tend to get rid of their cash more easily.

#source


RELATED

What Factors Influence Tezos (XTZ) Token Price?

Cryptocurrency continues to gain more and more attention with time. The systemic worries that accompany traditional assets, including stock fiat currencies...

The Relationship between Gold and the USD

If you have been reading our research articles, you must have seen that our analysts very often talk about the negative correlation between gold and the US dollar...

NFTs and Tokenization of the Economy

Non-Fungible Tokens (NFTs) are the new hype in the digital world. These tokens are digital representations of value created using blockchain technology...

Best Cryptocurrency to Invest in During 2020

While Bitcoin is still very much the most well known, and most widely regarded cryptocurrency around, it is only one in a list of near thousands...

What Is Equity: A Complete Guide

Equity, also referred to as shareholder equity, is one of the most common terms in the financial markets that almost every investor or trader has come across at least once...

Bitcoin Investment: A Guide To Trade Bitcoin

As you may already know, cryptocurrency, especially bitcoin, is the most traded financial instruments in recent history. Bitcoin is a popular digital currency among...

Trading Like A CFO - Organizing

Once you've got your trading plan in place, it's time to put it in practice. This is the fun part that got you interested in trading in the first place, so you've...

What Is the Safemoon Coin, and Can It Rise to the Moon?

The cryptocurrency market is moving so quickly that it's getting harder to keep up with new coins. Just days following the first big surge of Dogecoin, the market saw another...

MetaTrader 4 vs MetaTrader 5: Which is Better in 2022?

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) are the world’s most popular trading platforms, developed by MetaQuotes Software Corp. Millions of traders all over the world...

Security Tokens Versus Utility Tokens: Which Is Better?

The cryptocurrency industry is vast and diverse. There are DeFi tokens, non-fungible tokens (NFTs), Bitcoin, altcoins, and much more. The categories of crypto assets...

Is MetaTrader 4 good for Crypto?

MetaTrader 4 is used to trade a variety of financial instruments including some of the world’s most popular cryptocurrencies. In this blog, we’ll look at the benefits of using MT4 for crypto trading...

A Complete Guide to Online Indices Trading

An increasing number of traders is interested in indices markets and CFD trading. Indices measure how a group of stocks performs. The idea is to focus on how strong...

Maximizing Returns with USDT Staking: A Comprehensive Guide

In the dynamic world of cryptocurrency, staking has emerged as a popular way to earn passive income. Among the various digital currencies available for staking...

A Guide to Trading Metals

Precious metals such as gold and silver have been recognised as valuable metals for a long time, but gold and silver are not the only ones out there for investors

How to Trade CFD effectively like the Pro

Hardly can anyone talk about investment without mentioning contract for Difference (CFD) because of its popularity on most forex trading platforms. CFD is a contract...

3 Tips on How to Take Advantage of Volatile Markets

What’s your first reaction when market prices suddenly go tumbling down or climb up? In any case, as a trader, you’ve probably experienced market volatility in a number of situations...

Libertex: Crypto bears getting ready to hibernate

After a short hiatus, the cryptocurrency market is back in the spotlight once again. Just a matter of weeks ago, there was talk of burst bubbles, lost fortunes and even a long...

Exploring The Limitations Of Fundamental Analysis: A Comprehensive Perspective

Fundamental analysis is a method used to evaluate securities by examining the underlying factors that influence their intrinsic value. It involves analyzing both qualitative...

Why Do Markets Fall?

No financial market, including Forex market, can grow without a recoil for a long time. Inevitably on the chart will be formed "waves" against the movement...

Crypto CFDs: A Comprehensive Look at the Modern Alternative to Direct Cryptocurrency Trading

Cryptocurrencies have marked their presence in the investment world with their decentralized, transparent, and private characteristics. While direct ownership of cryptocurrencies remains a common choice...

FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%
FXNovus information and reviews
FXNovus
75%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.