What is the U.S Federal Interest Rates 

The Federal Reserve (Fed) sets the interest rates that banks charge each other for short-term loans, known as the federal funds rate. The federal funds rate is the benchmark for other interest rates, such as mortgage rates, credit card rates, and car loan rates. The Fed has two primary tools for controlling interest rates: open market operations and the discount rate. Open market operations involve buying and selling Treasury securities in the open market to influence the supply of money in the economy. The discount rate is the rate at which banks can borrow money directly from the Federal Reserve. 

5 ways Federal Interest Rates affect your money 

Interest rates have a significant impact on the economy, and changes in interest rates can affect consumers in many ways: 

Mortgages: When the Federal Reserve raises interest rates, mortgage rates tend to increase, which can make it more difficult for people to buy homes. 

Credit Cards: Credit card companies typically charge variable interest rates, which are often tied to the prime rate. When the Federal Reserve raises interest rates, the prime rate increases, and credit card rates follow. 

Car Loans: When interest rates rise, car loan rates tend to follow. This can make it more expensive to finance a car. 

Savings Accounts: When interest rates rise, savings account rates tend to increase as well. This can be good news for savers, as they can earn more interest on their savings. 

Inflation: The Federal Reserve raises interest rates to combat inflation. When inflation is high, interest rates tend to be high as well. High interest rates can help keep inflation under control, but they can also make it more expensive for consumers to borrow money. 

Why is the Federal Interest Rates important 

The Federal Reserve sets interest rates to achieve its dual mandate of price stability and maximum employment. The Fed raises interest rates to slow down inflation and lower interest rates to stimulate the economy. The Federal Reserve also uses interest rates to manage the money supply in the economy. By increasing or decreasing the money supply, the Fed can affect the overall level of economic activity. 

Interest rates also play a critical role in financial markets. Changes in interest rates can affect the prices of stocks, bonds, and other financial assets. For example, when interest rates rise, the prices of bonds tend to fall, and when interest rates fall, the prices of bonds tend to rise. 

What makes the Federal Reserve (Fed) change Interest Rates 

The Federal Reserve changes interest rates based on its assessment of the economy’s performance. The Fed’s policymaking body, the Federal Open Market Committee (FOMC), meets regularly to assess economic conditions and determine whether to raise, lower or maintain interest rates. The FOMC considers a range of economic indicators, including inflation, unemployment, and economic growth, when making its decisions. 

In general, the Federal Reserve raises interest rates when it wants to slow down inflation, and it lowers interest rates when it wants to stimulate economic growth. The Fed may also change interest rates in response to external factors such as changes in the global economy or financial market instability. 

Where can you find the Federal Interest Rates 

The Federal Reserve releases information about interest rates through its website and other public channels. The Federal Reserve publishes the minutes of the FOMC meetings, which provide insight into the committee’s thinking and decisions.

What is the U.S Federal Funds Rate 

The U.S Federal Funds Rate refers to the interest rate at which depository institutions lend and borrow money from each other overnight to maintain their reserve requirements set by the Federal Reserve. The Federal Reserve sets a target for the Federal Funds Rate, and then uses open market operations to adjust the supply of money to keep the rate within the target range. 

How does the U.S Federal Funds Rate work 

The Federal Funds Rate is the rate at which banks lend to one another to meet their reserve requirements.

Banks are required to keep a certain amount of cash on hand, which is known as a reserve requirement.

The Federal Reserve uses the Federal Funds Rate as a tool to influence the supply of money and credit in the economy. When the Federal Reserve increases the Federal Funds Rate, it becomes more expensive for banks to borrow money, and therefore they are less likely to lend to consumers and businesses. This results in a decrease in the money supply and a contractionary effect on the economy.

Conversely, when the Federal Reserve decreases the Federal Funds Rate, it becomes cheaper for banks to borrow money, and they are more likely to lend to consumers and businesses. This results in an increase in the money supply and an expansionary effect on the economy. 

Why is the U.S Federal Funds Rate important 

The U.S. Federal Funds Rate is a valuable tool used by the Federal Reserve to manage the economy. Changes in the Federal Funds Rate can significantly impact borrowing costs for consumers and businesses, which can affect spending and investment decisions.

For example, if the Federal Reserve raises the Federal Funds Rate, mortgage rates and other loan rates will increase, making it more expensive for consumers to borrow money to buy a house or a car. This can lead to a slowdown in the housing market and a decrease in consumer spending.

On the other hand, if the Federal Reserve lowers the Federal Funds Rate, mortgage rates and other loan rates will decrease, making it easier for consumers to borrow money and increasing consumer spending. 

What are the differences between the Federal Funds Rate and Regular Interest Rates 

The Federal Funds Rate is the interest rate that banks charge each other for overnight loans to meet reserve requirements. Regular interest rates, on the other hand, refer to the interest rates that banks charge consumers and businesses for borrowing money.

The Federal Funds Rate is set by the Federal Reserve and is used as a tool to influence the money supply and credit in the economy, while regular interest rates are set by banks based on their cost of funds and risk factors. The Federal Funds Rate is typically lower than regular interest rates, as it is a short-term rate and banks are lending to each other, while regular interest rates are based on the longer-term risk and cost of lending to consumers and businesses. 

Where can you find the Federal Funds Rate  

The Federal Reserve announces the Federal Funds Rate eight times a year after the Federal Open Market Committee (FOMC) meetings. The FOMC is responsible for setting the target range for the Federal Funds Rate, and the announcement is made at the end of each meeting.

The Federal Reserve also publishes the minutes of the FOMC meetings, which provide details on the discussions and decisions made by the committee.

The Federal Funds Rate can also be found on various financial news websites and is closely monitored by economists, investors, and financial market participants. 

What is the U.S Consumer Price Index (CPI)  

The U.S Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI is widely regarded as one of the most important economic indicators in the United States as it measures the rate of inflation, which is a key factor in determining the state of the economy. The CPI is compiled monthly by the Bureau of Labor Statistics (BLS) and is used by policymakers, economists, and investors to track changes in the cost of living and make informed decisions. 

What are the various categories of Consumer Price Index (CPI)  

The Consumer Price Index is comprised of various categories, each with its own weight in the overall index. The major categories of the CPI include food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. The weights assigned to each category reflect the relative importance of each category in the spending habits of consumers. For example, housing typically has the highest weight in the index, reflecting the fact that it is the largest expense for most households. 

Why is the CPI important  

The CPI is important because it is used to monitor inflation, which is a key economic indicator. Inflation can erode the value of money and impact the purchasing power of consumers. As such, policymakers use the CPI to make informed decisions about monetary policy, including setting interest rates. Investors also use the CPI to monitor inflation and adjust their investment strategies accordingly. Additionally, the CPI is used to adjust payments for various government programs, such as social security and other entitlements. 

What goes into the Consumer Price Index  

The CPI tracks the prices of a wide range of goods and services, including food, housing, clothing, transportation, medical care, recreation, education, and communication. The index includes more than 200 categories of goods and services, which are further divided into subcategories.  

For example, the food category includes subcategories such as meat, dairy, fruits and vegetables, and nonalcoholic beverages. The housing category includes subcategories such as rent, homeownership costs, utilities, and household furnishings.  

The transportation category includes subcategories such as gasoline, public transportation, and vehicle insurance. The CPI also considers the frequency of purchase and the relative importance of each item to the average household. The Bureau of Labor Statistics, which is responsible for compiling the CPI, surveys thousands of households to determine their spending patterns and then uses this information to weight the various goods and services in the index. The resulting CPI is a valuable tool for policymakers, businesses, and consumers in understanding inflation and making informed decisions about the economy. 

Where can you find the Consumer Price Index  

The Consumer Price Index is released by the Bureau of Labor Statistics monthly. The release schedule for the CPI is typically announced several months in advance and is available on the BLS website. The CPI is also widely reported in the media and can be found on numerous financial news websites. Additionally, investors and economists often track the CPI using specialized software and data services, which provide more detailed analysis of the index and its components. 

What is the Consumer Confidence Index 

The Consumer Confidence Index (CCI) is a survey-based economic indicator that measures the level of optimism that consumers have in the economy. The CCI is released monthly and is closely watched by economists, investors, and policymakers as an important gauge of the health of the U.S. economy. 

Understanding how the Consumer Confidence Index works 

The CCI is compiled by the Conference Board, a non-profit research organization. The CCI is created through a survey of a random sample of 5,000 households across the U.S. Respondents are asked questions about their perceptions of current business and labor market conditions, as well as their expectations for the future.

5 ways the Consumer Confidence Index affects you 

The CCI has significant implications for consumers, businesses, and policymakers.

Here are five ways that the CCI can affect you: 

Consumer Spending: When consumers are confident in the economy, they are more likely to spend money on goods and services, which can help drive economic growth. 

Business Investment: If businesses perceive that consumers are confident in the economy, they may be more likely to invest in their operations, which can help create jobs and drive economic growth. 

Interest Rates: The CCI can also influence the actions of the Federal Reserve. If the CCI shows that consumers are optimistic about the economy, the Fed may be more likely to raise interest rates to prevent inflation. 

Stock Market: The CCI can also impact the stock market, as investors may buy or sell stocks based on their perceptions of the economy as indicated by the CCI. 

Job Market: The CCI is closely watched by policymakers as an important indicator of the health of the labor market. When the CCI is high, it can signal that consumers are more likely to be optimistic about job prospects, which can help drive employment growth. 

Why Is the Consumer Confidence Index Important 

The significance of the Consumer Confidence Index lies in its ability to reflect consumer sentiments regarding the current state and future trajectory of the economy. Administered by the Conference Board, the index comprises five questions concerning the current economic situation and three questions pertaining to future expectations. It offers valuable information on consumer spending and saving patterns, which can aid businesses and economic leaders in monitoring inflation and output levels. 

Where can you find the Consumer Confidence Index 

The Conference Board releases the CCI on the last Tuesday of every month at 10:00 a.m. ET.

The CCI is on the Conference Board’s website, financial news websites and platforms. Additionally, many financial institutions provide their own analysis and interpretation of the CCI, which can clarify the implications of the index for the broader economy. 

Explore more articles on Forex Trading Education on our blog

Highly anticipated economic reports are set to be released this week, including the Bank of England Rate Statement, US Consumer Price Index (CPI), and US Producer Price Index (PPI). These reports are vital, providing traders and investors with essential data and ensuring they stay ahead of the dynamic market.

Consumer Price Index | US (10 May)

CPI in the US rose by 0.1% in March 2023, showcasing a slowdown in increment from February’s 0.4% increase.

According to analysts, the CPI reading for April—which will be released on 10 May—is expected to rise by 0.3%.

Takeaway: Following the negative market reaction to the Fed rate decision, the market will now be closely watching the Consumer Price Index. If the results align with the forecast, we can anticipate a slight boost to the US dollar.

Bank of England Rate Statement | UK (11 May)

During its March 2023 meeting, the Bank of England raised its key bank rate by 25bps to 4.25%, with the objective of bringing inflation back to the 2% target. 

Some analysts expect the next rate hike will be by another 25bps to 4.50%.

Takeaway: Based on last month’s hawkish inflation and wage data, the Bank of England is expected to implement another 25 basis-point rate hike. However, due to recent comments by the bank on the delayed impact of prior tightening measures, the criteria for further actions have increased. Unless there is negative economic news in the next few weeks, we predict that there will be no further adjustment in June.

Producer Price Index | US (11 May)

Producer prices for final demand in the US decreased by 0.5% month-on-month in March 2023, the largest drop since April 2020. 

The PPI data for April will be released on 11 May, with analysts expecting an increase of 0.3% from the previous month. 

Takeaway: Following the negative reaction of the market to the Fed rate decision, the focus now shifts to the Producer Price Index. If the result aligns with the forecast, we can anticipate a slight boost for the US dollar.

Gross Domestic Product | UK (12 May)

The UK economy experienced a halt in February 2023, after achieving upward growth of 0.4% in January. 

The GDP figures for March, due to be released, is expected to show an increase of 0.1%.

Takeaway: The Bank of England will rely on the latest UK GDP figures to help determine their next interest rate decision. The release of this data, if it’s in line with expectations, could potentially slow down the GBPUSD exchange rate. However, it could also signal the central bank to keep the interest rate unchanged in the next meeting.

Prelim University of Michigan Consumer Sentiment | US (12 May)

The University of Michigan’s US consumer sentiment came in at 63.5 in April 2023, up from 62 in March.

For May, analysts expect a reading of 64. 

Takeaway: The market closely watches consumer sentiment as it serves as an indicator of the public mood in the US. If the data release meets the forecast, we may see a boost for the US dollar.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com

Sydney, Australia, 3rd May 2023 – VT Markets, a leading online trading platform, has announced the launch of its highly anticipated King of the Hill Trading Contest. The contest will run from 1 May to 31 July 2023, granting the world’s best traders an exclusive chance at global recognition.

First launched early this year to a hugely positive reception, the popular competition is now set to build on its inaugural success. In addition to new participating regions, this latest edition will feature an expanded prize pool of over US$60,000, to be split between participating traders based on their realised profit.

Beyond cash prizes, top performers will also be featured on VT Markets’ Wall of Fame, allowing them to grow their influence and establish themselves among the world’s elite traders.

Commenting on the numerous incentives on offer, a VT Markets representative stated: “We are delighted to bring traders these exciting opportunities for higher earning potential and greater rewards. By leveraging our innovative copy trading platform, VTrade, traders can now showcase their trading expertise and access unparalleled chances for success.”

About the company:

VT Markets is a regulated multi-asset broker with a presence in over 160 countries. The broker has won many international accolades including Best Customer Service and Fastest Growing Broker. Its mission is to make trading an easy, accessible, and seamless experience for everyone.

For more information, please visit our website or email media@vtmarkets.com.

This week, market participants await the release of highly awaited economic reports, which will highlight key indicators such as Rate Statements in the US and Australia, as well as Employment Change in the US and Canada. These reports have immense significance as they enable traders and investors to make informed decisions and stay ahead of the market. 

ISM Manufacturing PMI | US (May 1)

The US ISM Manufacturing PMI fell to 46.3 in March 2023, the lowest since May 2020.

Analysts expect a reading of 46.6 for April 2023. 

Reserve Bank of Australia Rate Statement (May 2)

During its April meeting, the RBA held its cash rate steady at 3.6%, in line with market expectations. This marks the first pause in the current hiking cycle, which began in May 2022. 

For April, analysts expect the central bank to keep the rate unchanged at 3.6%. 

ISM Services PMI | US (May 3)

The US ISM Services PMI dropped to 51.2 in March 2023 from 55.1 in February 2023, the slowest growth in three months. 

For April, analysts expect a reading of 50.6.

FOMC Meeting and Funds Rate | US (May 3)

The Fed raised its funds rate by 25bps to 5% in March 2023. 

Despite a slower inflation rate, analysts anticipate that the central bank will continue to raise interest rates, with another 25bps hike to 5.25% in April 2023. 

European Central Bank Main Refinancing Rate (May 4)

Most ECB policymakers agreed to raise key interest rates by 50bps to 3.5% last month, though some members would have preferred not to increase them until the financial market tensions had subsided. 

The ECB is set to deliver a 25bps rate hike in its May meeting, with further increases expected to be implemented in subsequent meetings.

Employment Change | Canada (May 5)

The Canadian economy added 35,000 jobs in March 2023, while the unemployment rate remained unchanged at 5% for the fourth consecutive month. This is near the record low of 4.9% seen in June and July 2022. 

For  April  2023, it is anticipated that job creation numbers will drop slightly to 25,000. The unemployment rate is expected to be at 5.1%.

Employment Change | US (May 5)

The US economy created 236,000 jobs in March, the least since December 2020. Meanwhile, the unemployment rate edged down to 3.5% in March 2023.

Analysts expect the US to create 190,000 jobs in April 2023, while the unemployment rate will be at 3.5%. 

Dear Client,

Please note that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com

Market participants anticipate several critical economic reports this week, including the BOJ Rate Statement, US Advance GDP, and Core PCE Price Index. These key reports will provide valuable insights and help investors and traders make informed decisions. Don’t miss out on this opportunity to stay ahead of the curve.

Here are the key events to watch out for:

Consumer Price Index | Australia (April 26)

The annual inflation rate in Australia rose to 7.8% in Q4 2022 from 7.3% in Q3 2022. 

For Q1 2023, analysts expect a more moderate increase of 6.8%.

Advance GDP | US (April 27)

The US economy expanded at an annualised rate of 2.6% in Q4 2022. 

For Q1 2023, analysts predict a rate of 2.3%.  

BOJ Rate Statement | Japan (April 28)

During its March meeting, the Bank of Japan unanimously voted to keep its key short-term interest rate at -0.1% and the rate for 10-year bond yields at around 0%.

This month, analysts expect that the rate will stay the same as the board introduces new quarterly growth and price estimates in Kazuo Ueda’s first policy meeting.

Prelim Consumer Price Index | Germany (April 28)

Germany’s consumer price inflation reached a seven-month low in March 2023, recording a year-on-year rate of 7.4%, down from 8.7% in the previous two months. The figure remained well above the European Central Bank’s target of 2%. 

Analysts predict a further decrease in April 2023, with an expected rate of 7.0%.

Gross Domestic Product | Canada (April 28)

Canada’s economy jumped 0.5% in January 2023, following a slight contraction of 0.1% in December 2022. 

For February, analysts expect it to increase by 0.3%.

Core PCE Price Index | US (April 28)

Core PCE prices in the US, which exclude food and energy, rose by 0.3% month-on-month in February 2023, following a downward revision of 0.5% in the previous month.

For March 2023, analysts expect a 0.4% increase. 

Employment Cost Index | US (April 28)

Compensation costs for civilian workers in the US rose 1% in Q4 2022, a third straight slowdown, compared to a 1.2% increase in the previous quarter.

For Q1 2023, analysts expect the index to rise by 0.8%.