Interest Rate Limbo
Thanks to the Federal Reserve’s three-quarter-point interest rate cut, the U.S. now has the lowest interest rates of any country except Japan. The U.S.’s 2.25% Fed funds rate compares to New Zealand’s 8.25% and Great Britain’s 5.25%. “If the U.S. economy does not recover or liquidity problems do not ease, we still believe that the Federal Reserve could drop interest rates to 1 percent, which would come close to matching Japan’s levels,” notes Kathy Lien, chief strategist at DailyFX.com. Japan’s rate is pegged at 0.5%.