Relationship between the Change in Shapes in Yield Curves and Changes in Economic Prospect of an Economy

Determining the cash rate by the Reserve Bank of Australia establishes a number of different factors for the Australian economy. The RBA is responsible for controlling monetary policy and ensuring that Australia’s financial system is stable. In light of recent events that have impacted economic growth, the RBA has maintained a 2.0% cash rate, which affects the overnight rate for loans to commercial banks. Previously held at 2.25%, a decrease by 25 basis points brought down the cash rate to 2.0%, an all time low in the past decade. The RBA held an expansionary stance to promote investment and spending in the local economy in order to drive growth. It is recommended that the RBA maintain the current cash rate of 2.0% in light of consumer confidence

The weak economic growth in Asia ad in Europe has helped in benefiting Canada and the US. Asia and Europe had also faced deflationary pressures which were caused by the changes in the rates of interest rates in the economy. The risk of the inflationary pressure in the US led to the increasing concern of the federal reserves. The Canadian bonds have been trading at a considerably lower yield as compared to the US bonds in the market. The situation was supposed to be maintained if the Canadian dollars in the economy appreciated relatively to those of the US dollars in the economy. The outlook for the bonds in the economy looked to be very attractive an aspect which was attributed to the changes in

In the late 2000s, major countries all across the world experienced a rapid decline in economic activity comparable to that of the Great Depression. The United States’ real estate market collapsing and “large amounts of mortgage-backed securities and derivatives…[losing] significant value” (Investopedia, LLC.) caused this Great Recession. Three wealthy countries, Japan, Germany and the United States, each experienced a distinct reaction to the economic obstacles that arose during the 2000s and continued into the 2010s, thus the three countries responded in varying ways.

The ASX200 Return diagram demonstrates the share return from 2nd Jan 2006 to 30th Jun 2014. It shows high volatilities between Aug 2007 to Jun 2010 and Jul 2011 to Jan 2012, the returns of US dollar, and this turbulence in Australia stock market may cause by bad economic news and unstable economic

Directly connected to changes in the U.S. interest rates are the value of U.S. Treasury Bonds. In the United States, the Treasury yield curve is the first to reflect changes in domestic interest rates. As the yield curve moves up or down, this largely dictates how global rates are set. Since Treasury bonds are considered a risk free asset, any other security must offer a higher yield to remain attractive. With interest rates expecting to increase, a great deal of pressure is put on emerging markets to remain attractive investment opportunities. Higher interest rates will likely follow with a higher dollar, and entice many global investors to park their money in the United States rather than emerging markets. This could ultimately hinder developing nation’s employment levels, currencies and exports.

To begin relating the article to the information taught in class I will analyze the formulas attributing to GDP and forecast what may occur due to increased interest rate based on basic macroeconomic methods. The equation for GDP is Y=C+I+G+NX, G is

The impact of Interest rate, Inflation rate, and Gross Domestic Product, on Economic Growth Rate

The US economy was the first to enter recession (2007), and the first to see the effects of the housing crisis seriously impact the banking system (2008). However, thanks to strong measures to re-capitalize the banks the US banking system is now clearly on the road to recovery. US households are also making good progress in repairing their balance sheets. The prospects are for continued slow growth of personal incomes (about 3% p.a.) at a rate that exceeds inflation and therefore supports additional savings and further debt repayment. However, US growth depends on successfully navigating the so-called “fiscal cliff” – the effective increase in a range of taxes (due to the expiry of several tax cuts enacted previously) amounting to $400 billion, together with automatic spending cuts amounting to about $90 billion, for a combined total cut in the deficit of close to $500 billion in a single year, (Visser, 2014). The re-election of President Obama feared that a renewed recession would be enough to enable the two sides in the US Congress to reach some kind of compromise, although not perhaps to the extent of fully erasing the threat to the US economy. Consequently there was another year of roughly 2% GDP growth in the US in 2014.

ABSTRACT The various theories of interest rate determination presented in economics textbooks each spotlight a particular fundamental force behind the equilibrium rate. Unfortunately, each theory’s successful emphasis of one determinant of the interest rate comes at the cost of distorting some other aspect of its determination. This paper argues that the basic market analysis of debt securities (e.g., bonds and commercial paper) left out of most macroeconomic as well as money and banking textbooks provides a straightforward and practical perspective on interest rate determination

On June 23rd, 2016 the United Kingdom held a referendum that would ultimately decide their economic and global relationships with the European Union, along with the rest of the world. Brexit, the highly known nickname of the phrase “Britain exiting” was vote to spate from their long standing union with the European Union. As a 52% of the UK passed Brexit it began to start controversy on whether they could or should operate by themselves. Immediately following that day, the price of gold spiked up by four percent. Even before the vote, uncertainty had already arose on the future of the European integration process if Brexit would to have been passed. As the outcome stands today, a majority of the UK approved the detachment of the European Union and would now begin to suffer blows to their economy in the short term, medium term and long term. One such impact that came rather quick was the drop in stocks. The exchange rates were a particular hit on large banks of the state. Though those two initial impacts recuperated in a week’s time, interest on government bonds 3 months or older conceived losses that would not be as easy to recover from as argued by Fichtner, Große Steffen, Hachula & Schlaak (2016) “evidence of this can be found in the prices of credit default swaps (CDS) for gilts, which have sharply increased compared to those of German government bonds” (p, 302). Another prediction leads to believe that government financing costs in particular are to rise in the medium

The following charts highlight the economic data of the US, Japan, Canada and the UK over the 2008-2011 period, illustrating the change in the different economic measures, from the St. Louis Fed International Trends Publication,

Based on the answer in a), UK’s economy is forecasted to grow in 2015 onwards. During growth in an economy, the credit spread between gilts and corporate bonds will tighten because companies will perform better in a

The combination associated with lower amount of worldwide growth and low costs of oil has meant that CPI value got reduced with the inflation forecasts has been revised by every major Central Bank. This is the reason why it has been seen that the market expectations related to the interest rates duration has been extended further. Due to weaker growth and opportunities related to inflation, GDP forecast, which have been calculated at present prices, that is basically the nominal GDP (Chun et al, 2015, p. 532). It has been predicted by the IMF in 2015 that Global nominal GDP growth will decline by 50% of the rate that was there in 20097, thus making it very difficult to decrease debt-to-GDP ratios. The UK (United Kingdom) is considered to have the most open trading economy in the entire world and does not have immunity towards a weaker global outlook. Though, the productivity growth of the UK has been low since the occurrence of the financial crisis in similar with other

The period from 2008 through today has been a highly difficult one, with countries struggling to support their national economies, to reduce costs and guarantee the living standards of their populations. At a general level, the recent years have manifested an economic crisis of a gravity unwitnessed since the Great Depression of 1929-1933. At a more particular level however, a deeper analysis would be conducted through the analysis of four economic indicators in four important global economies. The four economic indicators are the gross domestic product (GDP), the consumer price index (CPI), the unemployment rate and the interest rate, and the countries are the United States of America, the United Kingdom, Canada and Japan.

To predict the changes of fed fund rate in U.S and overnight policy rate in Malaysia.