Today, the Federal Reserve bank in the United States is set to make an announcement regarding another potential interest rate increase, which would represent the latest in a long string of such actions over the past year.
Should this proceed, it may dampen the enthusiasm of investors, and therefore have a negative effect on the US economy overall.
However, the US Dollar has remained strong, and when looking at this morning's chart analysts across the world are predicting that the interest rates in the United States may once again be increased.
As a result, it would perhaps be very understandable to consider the possibility that the US Dollar, which has been has been very strong this year against other major currencies, could perhaps decrease in value rapidly.
The reality is quite different and the US Dollar has only made a very slight dip against some of its major peers.
The British Pound was up to the high 1.23 range against the US Dollar early this morning during the London trading session.
This is because a number of central banks around the world are set to increase interest rates, and during the course of this week it is widely estimated that the combination of central banks in many key nations with developed financial markets economies may increase interest rates to highest levels since the financial crisis, stoking anxiety among some investors that this month’s bond market rally underestimates evidence of persistent inflation.
At the end of the 2000s, when the global financial crisis hit and major financial institutions with long heritages began to collapse - notably the high profile and catastrophic demise of Lehman Brothers, and subsequent other disasters such as the bankruptcy of Bear Stearns - the world's oldest investment bank - and nationalization of many large banks such as Barclays, HSBC and Lloyds due to their over-exposure to secured and unsecured credit, as well as the aggressive takeover attempt by Royal Bank of Scotland which resulted in it having to be bailed out by the British taxpayer, the interest rates were at around 5% in the United Kingdom, the Eurozone and the United States.
Since then, they have been incredibly low across the 2010s, and only in 2021 did they begin to rise again. It is looking likely that they will be up to the 5% mark again.
Of course, it is still a far cry from the 15% interest rates that were commonplace in the United Kingdom and some other key markets during the early 1990s, which is perhaps remarkable considering the geopolitical circumstances of the past three years, but 5% is a massive increment over the less than 1% many consumers have been used to for many years until 2021.
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