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The policy interest rate is a standard interest rate determined by the central bank to adjust the economy and price.
In general, if the interest rate rises, it is easy to cool the economy, and it becomes easier to stimulate the economy if the interest rate falls.
In this article, we organize the structure of policy interest rate, the impact of stock price, exchange rate, and bonds, and the points to be seen by investment for beginners.
First Con まず
The policy interest rate is the interest rate to adjust whether it is easy to borrow money or difficult to borrow.
In Japan, Japan Bank and the United States, the Federal Reserve System Board (FRB) determines the direction of policy interest through financial policy.
It is important for investors to not only the level of policy interest itself.
More important is the future direction.
Interest direction → It is easy to reverse the economic and stock price
Interesting direction → Easy to catch up with economic and stock priceHowever, the price is not determined by interest rate only.
As economic, corporate performance, inflation, exchange, and investor requirements move simultaneously, please read this article as a basic knowledge to understand the news rather than buying and selling decisions.
What is policy interest rate?
The policy interest rate is the base interest rate used by the Central Bank in financial policy.
Through this interest rate, the central bank will influence the amount of money you spend on the world, and the environment where companies and individuals borrow money.
In a word, policy interest rate is economicセルelerator and brake.
| Policy Interest | Ease of change | Work on the Scene |
|---|---|---|
| 利上げ | Increased borrowing costs | Easy to reduce spect |
| 利下げ | Less borrowing cost | Easy to stimulate |
| High interest rate | Consumables and investments | Inflation suppression |
| Low interest rate | Inc ing consumption and investment | Aiming for deflation and economic support |
Interest rate is widely affected by corporate financing, m gage, exchange rate, bond price, stock valuation, etc.
Therefore, policy interest rate is one of the most important macro indicators in investment news.
Why Central Bank Moves Interest Rates
The main purpose of the central bank to move the policy interest rate is the stability of the price and the adjustment of the economy.
Stable price
When the price rises rapidly, the burden of the household will be heavy.
Therefore, the central bank aims for the following effects by gaining interest.
- Reduce corporate borrowings
- Depression of personal consumption
- Reduce the amount of money that comes to the world
- Reduce inflation by chilling demand
However, if the interest is too strong, there is a risk that the economy is too cold.
the scene
Aggravation makes it easier to negatively impact corporate profits and.
In such circumstances, the central bank may aim for the following effects by interest:
- Lower the burden of m gage and corporate borrowings
- Investment
- Recover consumption
- Relieve financial market anxiety
However, interest reduction is not universal.
If the weakness of the economy is conscious as a deterioration of corporate performance, the stock price may be lower even if there is a low interest expectation.
Impact on Shares
In general, the interest rate is added to the stock price and the interest rate is easily negative.
There are two main reasons:
| Reason | 内容 |
|---|---|
| Funding Cost | Inc ing interest rate increases corporate borrowing burden |
| Discount rate | Inc ing interest rate makes it easier for future profits to fall |
If the interest rate is low, the company becomes easier to borrow and invest.
As a result, capital investment and business expansion will increase and the expectation for profit growth will increase.
On the other hand, when the interest rate rises, it is easy to revert to companies with high borrowing dependency and companies with a significant reflection on future growth.
In particular, companies with high PER’s growth strain, real estate and capital investment burden tend to be more susceptible to interest rate changes.
Impact on Bonds
The bond price and interest rate basically move in opposite direction.
Interest rate rise → price of existing bonds is easy to fall
Interest rate drop → The price of existing bonds is easy to riseIt is a point that the beginners can easily misunderstand, "If the interest rate rises, the bond will rise."
In fact, if the interest rate of the already issued bond is low, the appeal is lower than the newly issued high interest rate bond.
Therefore, the price of existing bonds is easier to fall down.
| Interest rate movement | Existing Bond Price | Reason |
|---|---|---|
| Interest rate rise | Easy to down | New High Yield Bonds Become More Attractive |
| Low interest rate | Easy to climb | Relatively attractive interest in existing enhancement |
In bond investment, it is important to check not only yield, but also price ctuation risk.
Impact on Forex
Foreign exchanges may make it easier to buy currencies in countries with high interest rates.
For example, if the U.S. continues the interest rate in Japan in the interest direction, the US dollar yield is relatively attractive and may move in the dollar high and yen low direction.
However, exchange rate is not determined by interest rate only.
It also affects trade balance, economic forecast, geopoli risk, and market risk tolerance.
| Changes in interest rate | Easy-to- exchange reaction |
|---|---|
| The U.S. interest rate increases from the Japanese interest rate | It is easy to get dollar high and yen low |
| U.S. Interest Expectations | It is easy to get dollar and yen |
| Increase market anxiety | It can move different from the interest rate difference |
Foreign exchanges also affect the yen conversion return of overseas stock ETFs and foreign currency assets.
Even if you see only domestic stocks, it is a theme that you want to check the exchange rate and interest rate in order to reflect the performance of export companies and import companies.
Points to invest
When you look at the policy interest rate news, you can easily understand the following three:
Policy Interest
What is important is not only the current number, but also the flow of up or down.
The market is ahead of the future.
For example, even if the actual interest is not yet made, the central bank can move the stock price and exchange rate just by suggesting interest.
Inflation rate
When the inflation rate is high, the central bank becomes less profitable.
Conversely, if the inflation calms down, it becomes more conscious of the area of interest stop and interest lower.
When looking at policy interest rates, it is important to check inflation,, and economics with a set.
Central Bank
The market reacts strongly to the dialect of the central bank.
In particular, the following words are noted:
- 利上げ継続
- Expectations
- Inflation
- Scenic reduction
- Longer interest rate
Even in the presentation of the same policy interest rate, the market reaction may change greatly by changing the tone of the meeting and statement.
Common failures
Buy and Sell with Short-Term News
The policy interest rate is effective with time differences in the economy.
If you decide the direction of the market by one presentation, it will be easier to judge.
In particular, it is important not to buy or sell the product only by heading the news as a beginner.
See only interest rates
Interest rate is important, but not all of the market.
Actually, the following elements move simultaneously:
- 景気
- Company Profile
- Inflation
- 為替
- Geopoli Risks
- Investor Relations
It is important to see the reason why interest rate is moving rather than simply determining "because of interest", "because of interest" and "because of interest"
How to use for beginners
First of all, if you think in the next order when you see the news, it will be easier to organize.
| Check | 見方 |
|---|---|
| Direction | Interest rate or interest rate |
| Reason | Inflation counter、s or spect、 support |
| Contact Us | Where does it work for stocks, bonds and exchanges? |
| Notes | s and views |
You don’t have to understand all complex financial policies from scratch.
First of all, the understanding of investment news will change greatly even if you are conscious of the interest rate or interest rate.
- Policy interest rate determined by the Central Bank There is a role to adjust the economy and price
- Interest is inverted to economic and stock price, and interest reduction is easy to catch up
- Bond price and interest rate basically move in opposite direction
- Interest rate difference is easy to calculate the currency's weakness
- In investment, it is important to see "directivity" and " encies" from "interest level"
The policy interest rate is the basis for connecting stocks, bonds and exchanges.
When the interest rate comes out in the news, let’s check “Why did you move?” and “How did you go next?”