What is the impact of globalisation on decrease or increase on interest rate????

Question

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Answer 1

Interest rates are set by the Federal Reserve... which is our country's Government Bank. It tries really hard to avoid inflation and just as hard to avoid a depression. Interest rates are indirectly affected by globalisation. Globalisation in general increases trade which is good for the economy... with customer confidence high, there is no need to have a low interest rate because people are investing the money they make. It is when trade is hindered (our reliance on foreign oil, parts, labor... etc) that consumer confidence drops... to avoid a depression in these cases, the interest rates drop to boost people's desire to continue to spend/borrow. This maintains the fine balance of our economy... and inflation would happen if people were overconfident in their opportunitites... this is when the Feds increase interest rates to make it harder for people to borrow and spend money they dont have. So rates are affected by globalization... but they are affected indirectly, its truly upto the Feds and their concern is the sustainability of our GDP/stable economic growth. Hope this helps clarify...

Answer 2

Basically, the first effect is on currencies, and then money starts flowing one way or another (in markets), and then the import/export business changes, and as a result the stock markets react. Stock markets look 6 months ahead and therefore will react pretty well when the rates and currencies are moving in one direction or another.

See more of an answer at:

http://www.businessweek.com/magazine/content/05_28/b3942008_mz001.htm