Discount rates

What are interest rates?

A key element of the banking system of the state is the Central Bank, the main tasks of which are to implement a monetary policy and ensure the purchasing power of the national currency. An important economic indicator in the Forex market is the interest rate.

A decrease in interest rates leads to an increase in business activity and increases inflation, while the national currency exchange rate decreases. An increase in interest rates, on the contrary, leads to an appreciation.

Thus, traders need to monitor the monetary policy of central banks, interest rates and press conferences of the main representatives of banks. All these factors affect the fluctuations of the national currency.

Interest rate
and rate
-0.75%
Last
change. rates (%)
0.00%
Date of last
revision
15.01.2015
Next
meeting
18.06.2020
Interest rate
and rate
0.10%
Last
change. rates (%)
0.00%
Date of last
revision
19.03.2020
Next
meeting
06.08.2020
Interest rate
and rate
0.00%
Last
change. rates (%)
0.00%
Date of last
revision
10.03.2016
Next
meeting
16.07.2020
Interest rate
and rate
Last
change. rates (%)
Date of last
revision
Next
meeting
Interest rate
and rate
Last
change. rates (%)
Date of last
revision
Next
meeting
Interest rate
and rate
Last
change. rates (%)
Date of last
revision
Next
meeting
Interest rate
and rate
Last
change. rates (%)
Date of last
revision
Next
meeting
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Swiss National Bank

SNB is the Central Bank of Switzerland. The bank has two headquarters: in Bern and Zurich. Officially formed in 1907, the Swiss National Bank is an independent Central Bank, managed with the participation and under the supervision of the Confederation.

Key SNB Features:

Ensuring the stability of the financial system;

Ensuring the liquidity of the national currency, namely the Swiss franc

Issue and distribution of cash

Storage of foreign exchange reserves

Participation in international financial cooperation

Governing Council consists of three members

• Thomas Jordan, chairman;

• Fritz Zurbrugg, vice chairman;

• Andrea M. Mehler, Board Member

The discount rate of the central bank in Switzerland is 0.75%. The maximum rate reached 3.5%. In contrast to the practices of some countries where the Central Bank is a regulatory body, SNB does not carry out such regulatory functions.

Bank of England
The Bank of England is one of the oldest Central Banks around the world. This institution appeared at the end of the seventeenth century.

The main functions of the Bank of England:

Support for currency value through open market operations
The implementation of monetary policy and control over inflation;
Ensuring the stability of the financial system.
Holding official gold reserves in the United Kingdom and about 30 other countries
Country Debt Management
The Bank of England is governed by a Board of Directors, which consists of Governor Andrew Bailey, two deputies and 16 members of the Board. All are appointed by royal decree after approval by Parliament

Decisions on interest rates are made by the Banking Committee on Monetary Policy. The Bank of England interest rate determines the conditions under which repo loans will be issued to commercial banks (a type of loan in which money is issued against securities, bonds and other types of securities). With an increase in the rate, the profitability of this type of loans decreases, banks raise funds through deposits, give out consumer loans less, bonds are placed in a larger number, and borrowed funds from abroad are also attracted.

European Central Bank (ECB)
It was founded on June 1, 1998. The headquarters is located in the German city of Frankfurt. The system of European banks consists of the ECB and national banks (Banks of Belgium, Greece, Spain, France, the Bundesbank and the Monetary Institute of Luxembourg)

The main functions of the ECB:
The conduct of monetary policy at the expense of the single currency
development and implementation of monetary policy in the euro area;
Euro emission
setting interest rates.
economic stability in the eurozone
The ECB makes all decisions and establishes rules for their implementation. Then it passes all the instructions to the actions of the national Central Bank, which commit them. The ECB is considered an independent legal entity, but its responsibilities include annual reporting to the European Parliament and the European Commission. The board currently includes the ECB President Christine Lagarde and ECB Vice President Victor Constantio. By 2020, the ECB balance is equal to a record 44% of the Eurozone GDP against 111% of the Bank of Japan 28% of the Fed

The ECB has three key interest rates:
ECB refinancing rate, which is carried out weekly. The Central Bank determines the cost of the loan that it provides to commercial banks
Discount rate, which is designed for emergencies when a commercial bank needs a loan
The deposit payment rate, which is a consideration for the reserves that commercial banks place with the Central Bank.
Rates are now at historical lows, and some even reach negative values.

Bank of Canada

The Central Bank of Canada was established in 1934. The bank is managed by a staff including a manager, a first deputy manager and four deputies. Since 2013, Steven Poloz has been the managing bank.

The main functions of the Bank of Canada:

⁃ monetary policy regulation

⁃ maintaining financial stability and inflation,

⁃ maintaining the national currency

⁃ mobilization of the price level, level of production and trade.

⁃ issue of banknotes into circulation,

⁃ regulates state gold and foreign exchange reserves

Canada's monetary conditions determine the exchange rate and interest rates.

Lower rates lead to higher costs and lower savings, while the depreciation of the Canadian dollar may stimulate exports and curb imports. An increase in interest rates leads to cost containment, and an increase in the value of the national currency helps to reduce exports and increase imports.

The central element of monetary policy is also inflation control. The Bank's goal is to maintain inflation in the range from 1 to 3%. If inflation is constantly growing, then it takes measures to tighten monetary conditions. If the economy is prone to slowdown, the Bank can soften its conditions by causing loweinterest rates.

Central Bank of Japan
The Central Bank of Japan was established in 1882.

It performs the following functions:
pursuing monetary policy; interest rate control;
control of the national banking system,
conducting operations with government securities
issue of money
control and stabilization of the national currency
The Bank of Japan is a joint stock company: 55% of the capital belongs to the government, 45% to private shareholders. The main profit is charged to the state budget.
The highest governing body of the Bank of Japan is a political council consisting of 9 members, headed by chairman Haruhiko Kuroda and his two deputies. To implement the monetary policy in the country, the Bank of Japan sets a refinancing rate at which banks can raise and place funds. At the moment, the rate is at a negative level of -0.1%.

Reserve Bank of New Zealand
RBNZ is the Central Bank of New Zealand, founded on August 1, 1934. The headquarters of the regulator is in Wellington. At the head is Nicholas Spencer, Acting Manager

Since the founding of the national bank, the British pound has participated in material calculations. Today, it was replaced by the New Zealand dollar, whose exchange rate is affected by news regarding export and GDP indicators. The country's economy depends on the export sales of national products

Functions and tasks of RBNZ
determining the course of monetary policy aimed at maintaining price stability;
maintaining the effectiveness of the financial system;

Maintaining inflation in the range of 1-3% with the prospect of maintaining inflation at the target midpoint of 2%.
satisfaction of the public need for national currency.

The interest rate has been established since 1999. This is the average percentage indicator under which the RBNZ lends for a short period and accepts funds for deposits. Members of the RBNZ Governing Council determine the rate 8 times a year.

US Federal Reserve System

The US Federal Reserve is the Central Bank of the United States and an independent body that is completely independent from the government. The Federal Agency was formed on December 23, 1913 and to this day provides control over US banking business.

The US Federal Reserve performs the following functions:

First of all, it performs the tasks of the Central Bank

Also controls the country's banking system

Carries out the stability of the monetary policy of the state and the financial system

Carries out the release of the dollar - the domestic currency of the United States.

The main difference between the Fed and the Central Bank of other banks is that it belongs to private individuals.

The main structure of the Fed includes:

Central Board of Governors, which is located in Washington.

12 Federal Reserve Banks located in major cities such as New York, Philadelphia, Cleveland, Atlanta, Richmond, Chicago, St. Louis, Kansas City, Minneapolis, San Francisco and Dallas. The shareholders are private banks.

FOMC - open market operations committee

The Governing Council is chaired by Chairman J. Powell and his Deputy Richard Clarida, who are in turn elected by the President. The main shareholders of the Fed own more than two hundred thousand shares of the Fed. 65% of them belong to foreign nationals, whose share is distributed between national banks. According to the law of 1913, the names of the owners of the bank are not subject to disclosure. The Fed is controlled by the Senate and the President. They are the ones who set the policy for the Fed.

The state of the American economy is governed by the value of the discount rate:

When the discount rate is reduced, the currency starts to cost less, the demand for loans issued by the Central Bank increases, as a result, commercial banks have the opportunity to reduce the cost of their loans.

An increase in money supply entails the danger of inflation. Therefore, the Regulators monitor its level, in case of its increase they raise the rate again.