Bank interest rate is altered from time to time so that inflation can be tamed to some extent. This is done solely by the Central Bank of all countries. The rate of interest is governed by the monetary policies, which aim at bringing about stability in the economy and price stability.
Bank interest rate may be referred to as derivatives, which are in form of �prescribed targets� related to the assignment of credit to various industries and other sectors of the economy.
This may also include prescribed lending rates as well as deposits. The central banks have the power to regulate the supply of currency. This is usually done in order to adjust to inflation.
Bank Interest Rate and Monetary Policies:
The Monetary policies are targeted for attaining a welcome mix of price stability as well as growth of the economy. It also ensures that there is enough credit flow to the sectors, which are very productive. Another aim is also to streamline the foreign exchange market and curtail destabilization in the economy.
Bank Interest Rates of Important Central Banks around the Globe:
The following figures show the prevailing target bank interest rates of some of the important Central banks around the globe:
Bank of Japan hiked the bank interest rate to 0.50%. The last time the rate of interest was altered was February 2007.
The Federal Reserve or FED has set the target interest rate to 2.25%. The last change was in March 2008.
Reserve Bank of Australia or RBA has set the target interest rate as 7.25%. This change was effected in March 2008.
Bank of England or BOE has the bank interest rate as 5.25%. This rate was with effect from February 2008.
RBNZ or Reserve Bank of New Zealand’s rate of interest is 8.25% since July 2007.
European Central Bank or ECB has its bank interest rate fixed at 4% since June 2007.
Swiss National Bank or SNB ‘s interest rate ranges between 2.25% to 3.25%. The last hike was in September 2006.
Bank of Canada has decided to freeze its bank interest rate at 3.50%. There was an interest rate cut on 4 th March 2008.
Making use of several instruments attains economic stability:
Bank Interest rates, which are administered
Statutory liquidity ratios
Cash reserves or CRR
OMO or Open Market Operations
Last Updated on : 30th July 2013