Interest rates are one of the important concepts in economics,
for currency trading (Forex) traders are giving great importance to them because they are the largest and most important measure to assess a country's currency.
so they set and watch the economic news, analytics and expectations as well as economic indicators over time trying to predict what the next interest rate mechanism because of its effect on the exchange rate for the currency.
Interest rates:
are the interest rate on loans
from the Central Bank of the state and by it the CB can control the interest rates on commercial bank loans to producers and consumers.
And each State Central Bank officials meet about 8 to 10 times a year to determine the interest rate, and there may be emergency meetings and not predetermined in the economic agenda because interest rates must always be adjusted according to the economic conditions and the financial problems facing the State and it is considered an important instrument to the monetary crisis.
Three resolutions to be expected at the meeting to discuss interest rates by the central bank members of a country, namely:
- Either vote to reduce/decline interest rates
Thus working to reduce the interests received by banks when lending money to producers, and this help to increase demand for loans and thus increase the pace of production and investment in the country, and that help to solve problems of inflation, rising prices and features of the recession that arise from them هn addition to stimulating growth.- voting to raise interest rates:
And thus reduces the loan requested by investors from the banks, leading investors to reduce the pace of production and investment in the State which reduces growth and makes it slow and this decision could be implemented in case of economic prosperity and high growth rates and sometimes in line with oil price rises or import and other things.
The last option is to be voted on that interest rates stay the same
Because they fit the current economic situation and there is no need to modify them (this may be negative or positive for the currency as expectations and nominations
In fact, the impact of interest rates on the price of the currency rate decision varies between long-term impact and short-term effect, and for traders we can say that the high-interest rates often lead to currency appreciation and low interest leads to currency devaluation