The reasons aren’t what you think …
The Federal Reserve increased the target for the bank’s benchmark rate by 0.25% (to a range of 2% to 2.25%) last week, the eighth rate rise since 2015. Are rising interest rates really having any impact on mortgage or saving rates?
The U.S. economy is doing great and is set to contribute 25% of global Gross Domestic Product (GDP) this year, its highest share since 2007. The rise of the U.S. dollar and increases in interest rates are squeezing emerging economics at an unprecedent pace. But it isn’t just emerging economies that are feeling the squeeze, Europe has its problems with Italian debt (and yields), the Australian dollar which has long been considered a growth asset has been falling this year and elsewhere trade worries and rising oil prices are having a big impact on other nations. Even German factory orders are the weakest in years as the U.S. is truly taking back economic leadership.
Canadian household credit growth is slowest since 2001 with Household credit (Annualized 3-month growth rate) growing at 2.98% and Household Mortgage credit (Annualized 3-month growth rate) growing at 2.85%.
Interest Rates globally are changing (in both directions) at the fastest pace ever in the history of the modern central banking system. Nearly half of the countries in the world have cut interest rates while the other half have hiked them in the past 6 months. The average change for countries with a change in interest rate has been +0.22% in the past 6 months. Take Argentina and Turkey out and the average (global) interest rate has actually fallen.
Since the financial crisis of 2008-2009 the difference between bank deposit growth and bank loan growth in the U.S. diverged in a big way, graph below,
Here are the base interest rates for Central Banks as of June 8, 2018 for each country (in increasing order of interest rate),
Are interest rates rising or falling globally? Well, if the past three months are anything to go by then the world is moving in different directions with regards to interest rates. So much for synchronized increases or decreases in interest rates …
Here is a map of changes,
Here are the base interest rates for countries in the European Union plus additionally those in the European Economic Area and Switzerland (as of June 5, 2018),