Interest Rates Predictions

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 proposition.

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.

Similarly 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.

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