| Inflation. When inflation rate is down, banks would cut | | | | determines the rates? For the US dollar, the trader |
| down interest rates to encourage economic activities. | | | | would be wise to watch closely interest rate decisions |
| On the other hand, during high inflation, banks would | | | | by the Federal Market Open Committee. FOMC |
| increase the interest rates to discourage lending and | | | | meets regularly each year to determine key interest |
| spending. Hiking up the interest rates boosts the value | | | | rates and to decide whether to increase or to |
| of the currency. This is true in US where rising of | | | | decrease the money supply through the buying and |
| interest rates by the Federal bank would encourage | | | | selling of government securities. In order to know more |
| investors to capitalize on higher returns. What is the | | | | about these decisions, the trader could read up on the |
| better way to measure inflation in a certain country | | | | FOMC meetings minutes released three weeks after |
| rather than to refer its consumer price index? Each | | | | the date of each policy decision. Speculations of a hike |
| country may have different ways of measuring and | | | | in interest rates would probably boost the dollar up. |
| inflation indication.You can actually identify the inflation | | | | Playing similar roles is the Europe Central Bank, Bank |
| rate by watching the housing market in UK which is | | | | of Japan, Bank of England and the Swiss National |
| considered more accurate representation.Who exactly | | | | Bank. |