With prices rising so Quickly, why are interest rates less than 12%?
128812
Savers have unions -- they're called credit unions. What other kind of union are you asking about? Labor unions?
396543
Interest rates are adjusted twice yearly so depending on the corresponding rate, it may take more or less time. Most have maturities greater than 10 years so don't expect the best return, but the involve less risk than stocks.
467394
raise interest rates.
542169
The shorter the interest term the faster it grows as the principal grows more quickly so you get more interest on your interest\n\nFor example lets look at the interest gained over 1 year on an interest rate of 12% per annum\n\nYearly: Well at the end of the year A = 1.12*P\nSo interest gained = 1.12*P - P = 0.12*P\n\nHalf Yearly: Well at the end of the year A = (1.06)*(1.06)*P (because the interest is applied each 6 months\n= (1.06)² * P\n= 1.1236*P\nSo interest gained = 1.1236*P - P = 0.1236*P > 0.12P\n\nQuarterly: Well at the end of the year A = (1.03)*(1.03)*(1.03)*(1.03)*P \n= (1.03)^4 * P\n≈ 1.1255P\nSo interest gained = 1.1255*P - P = 0.1255*P > 0.1236P\n\nMonthly: Well at the end of the year A = (1.01)*(1.01)* ... *(1.01)*(1.01)*P \n= (1.01)^12 * P\n≈ 1.1268P\nSo interest gained = 1.1268*P - P = 0.1268*P > 0.1255P\n\nDaily: Well at the end of the year A = (1.0003288)*(1.0003288)* ... *(1.0003288)*P \n= (1.0003288)^365 * P\n≈ 1.1275P\nSo interest gained = 1.1275*P - P = 0.1275*P > 0.1288P\n\nNow while it may not sound like much over 1 year over 20 years it can become significant\n\nJust quickly over 20 years\n\nYearly: Interest = ((1.12)^20 -1)*P = 8.6463*P\nHalf Yearly: Interest = ((1.06)^40 - 1)*P = 9.2857*P\nQuarterly: Interest = ((1.03)^80 - 1)*P = 9.6409*P\nMonthly: Interest = ((1.01)^240 - 1)*P = 9.8926*P\nDaily: Interest (using 365.25 days per year to account for leap years)= ((1.0003285)^365.25*20 - 1)*P = 10.0154*P
676672
If by expansionary you mean investing in other currencies, it would probably drive the domestic rate downwards. If a country doesn't trust its own currency why should the people?\n\nA contractionary money policy? You got me on that one. Not familiar with what that term means.
571786
Open your mind set beyond the last 4 years when interest rates were super low.  They are STILL low to people who have had mortgages 10-15 years ago when rates were 10%, 15% and even 20%.\n\nOnly people getting mortgages within the last several years think rates are high now.  Explain to them the long term history of interest rates.\n\nFind people with HELOC's and convert them to Fixed rate loans.\n\nAs mentioned previously, there are many people with 2/28 and other ARMS that are going to want to convert to a fixed rate.\n\nAttend a few Real Estate Investing group meetings.  There are always people investing in Real Estate.  Be there when they need you.  Don't start out being pushy, just get to know them and be there often.
634146
If higher interest rates contribute to inflation then the Federal Reserve so have it wrong!!\n\nMost inflation is believed to come from an over active economy with too much money chasing too few goods. By  raising the cost of borrowing money, it reduces the amount of money people have to spend on more stuff. That slows down the economy. \n\nMost businesses don't rely on borrowed money to stay in business. They typically used borrowed money to expand their business or acquire other businesses.
646671
Inflation occurs when the value of a dollar decreases (i.e. when prices increase) on a consistent basis, usually due to an expanding money supply.  When the economy is growing too fast, the fear is that aggregate demand for goods in the economy will increase faster than supply, thus pushing prices higher.  This is bad for lenders who lent in more valuable dollars than they will receive back.  To combat inflation, the federal reserve raises the rates at which banks can borrow money, thus tempering demand in the economy and slowing inflation.  This can be a problem if the economy slows too much, because it can lead to unemployment and general economic stagnation.  This is the tradeoff in monetary policy between inflation and unemployment.  In the past, the federal reserve has shown a tendency to prefer to contain inflation over unemployment.
338040
I think most people don't really take into account the current interest rate when saving.  Even though they have gone up, they're still pretty low, if you look back at history.\n\nI might be enticed into buying some long-term bonds if they go into double digits, but by then the economy will look a bit strange.\n\nPersonally, I haven't changed my habits from the rise in interest rates.  They're still too low to worry about right now.
170987
I agree with VATreasuries, whom I will say has a very appropriate user name.\n\nHigher interest rates affect the monthly amount of money that people need to debt service a property.  Essentially, if money costs more... their costs are higher accordingly.\n\nOther factors like taxes & hazard insurance have similar effects (we Floridians know this all to well) restricting value.  Herein Monthly Costs.\n\nWhen these Monthly Costs exceed pace of income growth to where they become a higher ratio of gross income needed to service monthly... property values tend to recede.\n\nThese past years have arguably been an anomoly... largely because of an influx of investment dollars into real estate holdings.
340467
They are adjusted on an inflation basis.  Inflation + 1% is what they set the rates at.  When you bought them and the type of savings bond bond will also affect the rate, albeit slightly.
293276
This is true. If you can earn more for your money by keeping them in a bank, you tend to save and deposit them there. You will not be encouraged to borrow because you will be paying higher interest.\n\nWith lower interest rates, you tend to place your money where you could earn more, such as in business or other investments. Also, if you may borrow because you do not worry so much about the interest.
566887
I did.  You can usually get a much better (and fixed rather than variable) interest rate that way.  I am not sure what the cons are, I only know the pros.
573246
Absolutely yes!\nWith all of the "special financing" that was done in this last boom, (interest only, negative am's, ARM's, 80/20's).  They all work if you are in and out quick, few years max, or in a boom market when everything is going up 20-30% a year.  When prices quit going up and are coming down, and interest is on the rise and people barely made the payment when the interest was low. LOOK OUT BELOW!!  \nThere is going to be a crash similar to the one in the early nineties, just wait and see.
311119
True.  If the Aus$ is going to go down in value, then Austrailia needs to be pay higher interest rates to make up for the loss in value of its currency.
623981
Ignoring the Bush-bashing despite how much I might like it.\n\nRepublicans nowadays are "pro-business" or basically in economics "supply-siders".  It's a view where if the means of producing things, in this case businesses, are able to produce more, it will benefit the economy with higher production and lower prices.  Now, if the minimal wage was to be increased, where is that extra money going to come from?  The pockets of business owners and companies.  This means a higher cost for them which would mean that they aren't making as much money.  Since they are not making as much money, they will make less, creating higher prices from shortages and too much demand.\n\nOn the other hand, if we did have an increase on minimal wage, it could lead to higher inflation.  Companies may want to increase prices to soak up the extra cash.  In addition, it would be up to the Federal Reserve to control the inflation.  They may choose to do so by increasing the reserve requirement, making it harder for you to get a bank loan.  They may also choose to increase the prime interest rate, increaing all other interest rates elsewhere, hurting everyone in the economy.\n\nThe economy is a fickle, little thing.
103369
Fed impacts the economy with monetary policy through raising and lowering interest rates. The discount rate is the rate sets the interest rate for lending- and the government short term and long term bonds. \nRaising rates makes borrowing money more expensive (think of your credit card, or home loan, you want rates low because you'll borrow and spend more)- spending more fuels growth in the economy. \nHowever this needs to be balanced in order to curb inflationary pressures (where prices increase because of demand pull, or cost push). Having too much money sloshing around in the economy can create havoc in the economy because without keeping it in check, too much money will eventually lower the value of that money (think diamonds or something, the rarity creates value). \nThey have raised rates because:\n1. They are showing they are optimistic about the growth of our economy- raising rates signals they think our economy is growing, not slowing.\n2. They are also raising rates because globally, other countries are also raising rates and in order to keep attracting foreign banks/investors to hold our bonds (or debt) we need competitive rates. So if you want more info on what the foreign direct investment means, email me. Seems you're focused domestically.\n\nWhen will they maintain the existing level?\n- it depends on the growth of the economy\n- no one has a crystal ball- but if oil prices continue to increase and the fed doesn't want to lower interest rates, he could keep it steady instead of sending the signal of lowering rates (which would seem like a slowdown in the economy).\n- they will lower it if the expansion of our economy slows significantly- right now we are around 1.8% per quarter (double check- was in Wall Street Journal a couple of days ago). If the quarterly growth of GDP begins a downward spiral, then lowering interest rates will hopefully help reverse that trend (meaning fuel people to borrow and spend).\nHope this helps