A Look Back At Interest Rates

On 16 December 2008 the Fed lowered the federal interest rates to 0-0.25% range in response to the global financial crisis that followed the collapse of Lehman Brothers, and the severe recession – the worst in US history after World War II, recalls Bloomberg. Then the Fed issued a statement that “will use all available tools to restore economic growth and to preserve price stability.” In 2009, the Fed faced another kind of crisis – of rising unemployment. Then jobs fell by an average of 424 thousand. Per month, to October unemployment has reached 10% – the highest level since 1983

World loosening

In 2010, the effects of the financial crisis are already visible worldwide, so that major central banks left the path of the Fed to limit the damage. Bank of England lowered the base rate to 0.5%, whatever its level ever since. For comparison, at the end of 2007 the level was 5.75 percent. European Central Bank lowered interest rates on deposits to 0.25%. In 2011 briefly raise them, but after 2014 they even put in negative territory. Japan is taking its first decrease in interest than seven years since 2008, and in 2013 made it even more drastic loosening policy, including the massive printing of money.

Loosening of monetary policy in the world and helps the US by stimulating global growth. However, it contributes to capital flight to higher-yielding assets, which began more expensive dollar and makes the country’s exports more competitive.

On several occasions during the era of zero interest policy clashes fiscal policy are becoming an obstacle to recovery. In July 2011, Congress allowed the state to come to the brink of bankruptcy because of disputes whether to raise the federal debt ceiling. Ultimately, Democrats and Republicans reached a deal, but the crisis led Standard & Poor’s to lower the US credit rating, affecting nagativno capital markets and growth. Subsequent cuts in government spending also contributed to the economic problems.