Friday, March 19, 2010

Interest Rates Set To Rise Globally

Yesterday we commented on the possibility of the Brazilian bank rasing rates, which will make them the highest effective rates in the world. The vote was a split 5-3 in favor of staying the course, for now. The hike will likely happen next month.

Today Canada's inflation rate was higher than expected, pointing to a rise on the Canadian rate. The Canadian dollar responded by rising sharply.

Bloomberg today reports that US rates are set to rise as well.

"The Federal Reserve may increase the discount rate, charged on direct loans to banks, before the next meeting of the Federal Open Market Committee on April 28".
The reports cites Micheal Feroli, U.S. economist at JPMorgan Chase: “It’s going to happen at some point,” “Whether it’s today, whether it’s next week or next month is hard to say.”

"The board on March 16 held a 'general discussion of discount window matters' with the FOMC, the Web site said. Such a discussion wouldn’t be unusual either at a time when lending programs, financial stability and bank reserves are all part of the FOMC’s discussion about its monetary policy stance. “There has been no decline in borrowings since the discount-rate increase, which is why it is entirely possible they want to raise the discount rate in the days ahead,” Crandall said. “Their stated rationale for raising the rate was to turn it into what it used to be: a liquidity backstop instead of a primary source of funding.”

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