What is a Base Interest Rate?

The basic interest rate is the interest rate that has a universal reference in the financial market. Other interest rates or the price of financial assets can be determined based on this basic interest rate. The basic interest rate is one of the important prerequisites for the marketization of interest rates. Under the conditions of interest rate marketization, financiers measure financing costs, investors calculate investment income, and management of macroeconomic regulation and control requires objectively a generally recognized basic The interest rate level is used as a reference. Therefore, in a sense, the basic interest rate is the core of the interest rate marketization mechanism.

Basic interest rate

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Basic interest rates in the United States

As a continuation of the Fed's "moderate" austerity policy, the federal funds rate is expected to increase from 1.5% to 1.75%. Analysts said Fed officials have made it clear that, despite having raised interest rates twice in a row, they believe the current low level of federal funds rates is still unsustainable. As the majority of economists expecting interest rate increases, the focus of discussions is mainly on whether the FOMC's last two policy meetings in 2008 (November 10 and December 14, 2008) will continue to raise interest rates. Currently, the bond market-through the federal funds rate futures contract-reflects that the Federal Reserve will raise interest rates by a yard in November and will suspend interest rate hikes in subsequent December meetings. Futures contracts that are thinly traded and expire in the following summer reflect

Economic outlook

There may be four interest rate hikes in the next seven Federal Reserve meetings. Over the past 20 years, the world has been in a cycle of interest rate cuts. The USD LIBOR has fallen from 13.75% in 1984 to 1% in 2004. It has gone through 5 waves of declines and has rebounded since mid-2004. Currently it is around 5.75%. Interest rates in other major countries Similar.

Basic interest rates in China

The reason for the low commodity prices in China is overcapacity, the overcapacity is due to overheated investment, and the overheated investment is due to low resource prices (including land, labor, capital, environment, and policy thresholds). Enterprises are still profitable, especially foreign capital (Preferential policies, super national treatment). However, China's resource prices cannot continue to fall. Now the government is aware of this and has proposed a series of new policies, including sustainable development strategies and people-oriented concepts. This means that China's resource prices will no longer be cheap, including human capital, land prices, capital costs, environmental costs, and qualification thresholds.