User Rating: 0 / 5

Star InactiveStar InactiveStar InactiveStar InactiveStar Inactive
 

Interest Rates Decision

Importance: Enormous *****

Influence: Forex, Equity Markets, Commodity Markets, Bonds Market

US Release: US interest rates decisions are made by FED 8 times per year

EU Release: The European Central Bank (ECB) meets monthly to decide about its interest rates policy (Between the 10th and the 14th day of each month)

This is maybe the top economic indicator which can lead to extreme volatility and straightforward movements.

 

Interest Rates as the main Monetary Tool of Central Banks

Central Banks tend to change the level of interest rates in order to be able to apply their monetary policy. The monetary policy of every economic zone has to deal constantly with two problems -Inflation and Unemployment.

■ Interest Rate increase (↑) leads to lower (↓) Inflation lower (↓) consumer spending and higher (↑) unemployment

■ Interest Rate decrease (↓) leads to higher (↑) Inflation higher (↑) consumer spending and lower (↓) unemployment

Changes in the level of interest rates can be seen as signals of upcoming long-term changes in the monetary policy. Therefore, even tiny changes between the actual and forecasted interest rate level (0.05%) can highly influence any financial market and create trading opportunities.

US Rates

European Central Bank Meetings & IR Decisions

The European Central Banks’ Governing Council meets twice a month. During the first meeting, the Council assesses the current economic situation and takes decisions regarding the level of the key interest rates. During the second meeting, the Council focuses generally on the Euro-system.

The ECB Key interest rates

The Governing Council of the ECB sets the key interest rates.

(1) MROs -The rate of the main refinancing operations. This is the banking system’s bulk of liquidity interest rate.

(2) The interest rate on the deposit facility (overnight deposit rates)

(3) The interest rate on the marginal lending facility (overnight credit to European banks)

ECB Rates

 

MT4 Trade Signals Generator

 

The Effect of Interest rates in the Forex Market

◙ When the level of interest rates increases (↑) the demand for the underlying currency increases too (↑).

◙ When the level of interest rates decreases (↓) the demand for the underlying currency decreases too (↓).

 

The Effect of Interest rates in the Equity Markets (stocks & indices)

◙ When the level of interest rates increases (↑) the stock market is falling (↓).

◙ When the level of interest rates decreases (↓) the stock market is rising (↑).

 

The Effect of Interest rates in the Commodity Markets (precious metals, energy etc)

◙ When the level of interest rates increases (↑) the commodity prices are falling (↓).

◙ When the level of interest rates decreases (↓) the commodity prices are rising (↑).

 

Related Links: ► US Federal Reserve Bank | ► European Central Bank

 

READ MORE

■ COMPARE PROVIDERS

Forex Brokers

Trade Signals ► CFDs Brokers        
■ TREND INDICATORS Trend Indicators

» Standard Deviation

» Bollinger Bands

» Parabolic SAR

» Ichimoku

» Moving Averages » Fibonacci Trading
■ TRADING OSCILLATORS Oscillators

» Rate of Change

» RSI

» Williams %R

» Stochastic

» Gator

» Momentum

   

» MACD

» Awesome

» DeMarker

» DMS System

» CCI

» StochRSI
■ NEWS INDICATORS News Indicators

» Interest Rates

» GDP

» US NFP

» Consumer Price Index

» Retail Sales

» Trade Balance
   

» Purchasing Manufacturing Index

» Consumer Confidence Survey    

 

 

 

What is the Interest Rates Decision?

WebForex.net