15 countries with the lowest interest rates


In this article, we’ll take a look at the 15 countries with the lowest interest rates. If you want to see more countries with the lowest interest rates, go directly to 5 countries with the lowest interest rates.

Interest rates are important for economic growth.

Interest rates are how central banks like the Federal Reserve manage a country’s economic growth. During a recession, the Federal Reserve can lower interest rates and help stimulate demand to produce more economic growth. With lower interest rates, more people could potentially get a home mortgage and businesses could potentially borrow more funds to expand.

In boom times, the Federal Reserve can raise interest rates and reduce demand to keep the economy from growing too quickly. With higher interest rates, consumer and business borrowing is more limited.

Adjusting interest rates also helps central banks like the Federal Reserve to control inflation. In times of high inflation, the Federal Reserve raises interest rates to decrease demand to potentially reduce inflation. In times of low inflation, the Federal Reserve may sometimes lower interest rates in an attempt to prevent deflation.

With respect to the United States, the country’s interest rate refers to the federal funds rate, which, according to the Federal Reserve Bank of St. Louis, is: “The federal funds rate is the federal funds rate. interest at which depository institutions trade federal funds (balances held in Federal Reserve Banks) with each other overnight… The effective federal funds rate is essentially determined by the market, but is influenced by the Federal Reserve through open market operations to achieve the target federal funds rate.(2) The Federal Open Market Committee (FOMC) meets eight times a year to determine the target federal funds rate.”

The Federal Reserve elaborates further on the federal funds rate: “The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate that banks charge their customers with higher credit scores.. In addition, the federal funds rate indirectly influences long-term interest rates such as mortgages, loans, and savings, which are all very important to consumer wealth and confidence.”

As far as the United States is concerned, interest rates have been quite low for an extended period since 2008. Besides 2022 where the fed funds rate exceeded 3% in October, the federal funds rate was below 2 % every month except late 2018 and early 2019 when it peaked at around 2.42% in April 2019.

As for many other countries, interest rates were higher during the same period as some economies grew too fast while other economies struggled with high inflation.

The United States also has a unique situation in that its currency, the US dollar, is the dominant reserve currency of the world. This means that the US dollar is used by many other countries for trade and as a store of value. Because the US dollar is the reserve currency, US interest rates are generally lower than they would have been.

Congress describes the US dollar,

The US economy generally benefits from the dollar’s status as the world’s dominant reserve currency, once referred to as the “exorbitant privilege” of the United States by the French finance minister in the 1960s. Many central banks and financial institutions around the world want to hold US dollars, and dollar-backed securities like US treasury bills, there is a high demand for US dollars. This demand, in turn, allows the United States to borrow more cheaply (at lower interest rates) than it otherwise would.

2022

Interest rates have increased in many countries around the world in 2022 due to high inflation. In the United States, for example, the Federal Reserve has raised interest rates six times this year. As a result, mortgage rates rose significantly and the housing market cooled. Since many economists believe the Federal Reserve will raise rates further, many analysts believe there could be a recession next year.

However, interest rates in some economies outside the United States have been quite low in 2022. Low interest rates can potentially help an economy grow faster by potentially increasing domestic demand.

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Methodology

For our list of the 15 countries with the lowest interest rates, we took 15 countries with the lowest interest rates in the world according to tradingeconomics.com.

15 countries with the lowest interest rates

#15 Seychelles

Interest rate: 2%

Reference month: October 2022

Seychelles is a nation of 115 islands in the Indian Ocean that has beautiful beaches and coral reefs. Given the rebound in tourism this year, the IMF expects the country’s real GDP to grow by 10.9% in 2022 and 5.4% in 2023. In addition to strong economic growth, Seychelles also have a low monetary policy rate as the country has an interest rate of 2% in October 2022. According to tradingeconomics.com Seychelles interest rate has been 2% since the start of 2021 as inflation wasn’t really a problem. In October, the country’s annual inflation rate was 2.92%, down from 2.96% in September.

#14 Morocco

Interest rate: 2%

Reference month: October 2022

Morocco is a North African country that borders the Atlantic Ocean and the Mediterranean Sea. Given rising inflation in the country, the National Bank of Morocco raised the country’s benchmark interest rate by 50 basis points to 2% in September. Annual inflation in Morocco was 8.3% in September, compared to 8% in August. If inflation remains too high, interest rates may rise again. Nevertheless, Morocco’s current 2% interest rate is quite low compared to other countries’ interest rates and the country ranks 14th on our list of the 15 countries with the lowest interest rates.

#13 Barbados

Interest rate: 2%

Reference month: October 2022

Like Seychelles, Barbados is set to benefit from a rebound in tourism in 2022. According to IMF estimates, the island nation’s economy could grow by 10.5% in 2022, making it one of the world’s fastest growing economies. fastest growing in the world this year. With an interest rate of 2%, Barbados also has one of the lowest interest rates in the world in 2022 as well.

#12 Sweden

Interest rate: 1.75%

Reference month: October 2022

As annual inflation in the Scandinavian country soared to 10.9% in October, Sweden’s central bank raised the country’s interest rate by an unprecedented 100 basis points in September, to 1.75%. Given the unprecedented central bank hike, Swedish interest rates could rise in the coming months if inflation remains too high. Over the past ten years, Sweden’s interest rate has been below 2%.

#11 Taiwan

Interest rate: 1.63%

Reference month: October 2022

With an annual inflation rate of 2.72% in October compared to 2.75% in September, Taiwan can afford to have lower interest rates than some other countries with higher inflation rates. Indeed, Taiwan’s interest rate of 1.63% in October ranks 11th in the world in terms of monetary reference rate. In September, Taiwan’s central bank raised rates by 12.5 basis points in an attempt to keep inflation down.

#10 New Caledonia

Interest rate: 1.5%

Reference month: October 2022

New Caledonia is a French territory made up of several islands in the middle of the Pacific. Given its beautiful beaches and its coral reef, New Caledonia is a tourist destination. With an interest rate of 1.5%, New Caledonia’s domestic economy has a low cost of borrowing which could potentially increase demand.

#9 Denmark

Interest rate: 1.25%

Reference month: October 2022

As annual inflation rose to 10.1% in October 2022 from 10% in September, Denmark’s central bank raised the country’s interest rate in October to 1.25% from 0.65% previously. The increase stands in stark contrast to Denmark’s negative interest rates that the country imposed in 2012. Denmark’s central bank said: “The increase in interest rates is a consequence of the increase by the Central Bank European Union of its main monetary policy rate.

#8 Thailand

Interest rate: 1%

Reference month: October 2022

In August, the Bank of Thailand raised interest rates for the first time in nearly four years by 25 basis points to 0.75%. Given higher than expected inflation, Thailand’s central bank raised interest rates again by 25 basis points to 1% in September. Although inflation has increased in the short term, there is still hope that the country will manage to keep inflation low in the long term given the increases in interest rates.

#7 Comoros

Interest rate: 0.92%

Reference month: June 2022

Comoros is a nation made up of several islands off the east coast of Africa. With an area of ​​863 square miles and a population of less than one million, Comoros’ economy does not rank among the largest in the world. Nevertheless, the Comoros interest rate of 0.92% in June 2022 ranks among the lowest in the world. Given the rise in inflation in the country since June, there is a possibility that interest rates will rise in the country in the short term.

#6 Cambodia

Interest rate: 0.73%

Reference month: August 2022

Cambodia’s interest rate was 0.73% in August 2022, down from the previous interest rate of 0.75%. Meanwhile, Cambodia’s economic growth is expected to be around 5.3% in 2022 and 6.2% in 2023 according to the Asian Development Bank in September. In the same month, the Asian Development Bank expects the inflation rate for 2022 in Cambodia to be 5%.

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Disclosure: none. 15 countries with the lowest interest rates is originally published on Insider Monkey.

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