LOW INTEREST RATES – CURRENT AND EXPECTED
The interest rate plays an important role in the economies. It's like a self-regulator of capital allocation. Interest rate changes is a complex mechanism: 1) the economic downturn in the demand for credit decreases and this reduces the cost of credit, 2) economic recession increases credit risk, which is the rate-increasing factor, 3) improving the country's economic situation, growth of gross domestic product and positive direction of change of other macroeconomic variables, interest rates may rise. Factors affecting the rate can be divided into three categories: economic (inflation and the country's economic activity, the degree of foreign influence on financial markets, government securities supply and demand changes), political (control of the money supply, changes in the tax area, the reserve rate) and social (in the age structure of the population employment rate). The financial crisis is a challenge for everyone. In order to reduce stress in the financial sector, to increase the liquidity of the financial system and the implementation of monetary policy incentives measures, the ECB's key interest rate was reduced to a minimum low limit. Negative central bank policy interest rates in history have few examples: Switzerland (foreign currency deposits), Sweden, and Denmark (certificates of deposit), Switzerland, Denmark and Germany (negative short-term bond yields). ECB's cheap and readily available monetary policy can be a deciding factor in lending, businesses moving out of recession in the development phase. Requires detailed studies assessing the risk of interest rate theory implications for financial stability. DOI: https://doi.org/10.15544/ssaf.2012.21