Interest rates are
in essence the cost of borrowing money. When interest rates
are running high it means the cost of debt is higher, which
will have the effect of deterring individuals and businesses
from taking out loans. This creates a credit freeze. When the
rates fall borrowing money becomes once again a more attractive
On the other side
of the coin low interest rates make lenders less keen to lend
out money, or at least more cautious as to whom they will lend
to as the margins are lower and the risk involved less appealing.
At the same there is also less incentive for anybody to save
as the returns are less generous, although corporations will
be more inclined to invest in new production.
The general movement
of the economy and sometimes also geopolitical factors associated
with it can be an indicator of the future progress of interest
rates. Much of this will be coterminous with priorities in government
policy. For example, if tackling unemployment is known to be
the main priority of a particular government at a particular
time then the most accurate interest rates predictions are likely
to be those which point to a fall in interest rates, which can
have the effect of stimulating investment and spending.
if slowing inflation is the priority interest rates predictions
of an increase which will cool the economy and curb inflationary
pressure are liable to be the most accurate.
If you like
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Please see the spread betting providers website for further
details and seek advice prior to betting any funds.