sorry if this has been asked before, but do interest rates usually go up or down during a financial crisis? or is it complicated?
Depends on the type of crisis. The more inflation there is, the higher interest rates go (normally). The dollar bubble in the USA could implicate just that: higher interest rates, higher inflation. It's similar with Europe. But during deflation, it could happen vice-versa... Yet, that could still be a crisis. Thing is, during deflation, people tend to hold their money at themselves. Less money circulates, the prices tend to go down, GDP growth is low as well. We're currently witnessing some sort of deflation in the Western World. What I'm more curious about is this: If interest rates climb high, then what will happen to PM prices? Because if rates are high enough, people will feel enticed to use cash and invest in currencies, speculated with bonds and bank deposits. There is a scenario according to which people won't invest much in PM's, but would rather turn to cash (because of yielding interest rates). Not sure, though. PM prices could go high as well, while interest rates increase. I guess it's a matter of "which one goes higher"?
Depends on what sort of interest rates your talking about.. during the g.f.c. Official interest rates dropped, but credit spreads (the difference between say the RBA rates and what the market or banks actually charge you) increased. So mortgage holders may have been better off while businesses requiring short term loans paid much more Also depends or many other factors as well as per TreasureHunter, location of crisis, short/long term rates etc
As far as U.S is going with The Feds Quantatative Easing interest rates will stay at 0.00% for a few years yet because if they let rates climb again the USG's interest payments will skyrocket causing mayhem..............Japan has had rates as low as 1.00% for 22 yrs!
