New Delhi/New York, Oct 30: Wednesday's interest rate cut in the US has spa-rked speculations that a number of major econom-ies across the world, including the United States, Japan, England and Australia, are moving towards a zero-per cent regime, but bankers differ about India.
The rates have not been below the current level of one per cent in the US in the past five decades, but Japan had kept a zero-per cent rate policy for most of the time since 1999 till March 2006. The US Federal Reserve, on Wednesday cut its rate by 50 basis points to one per cent, while the Bank of Japan is meeting on Friday to review its rate. There are expectations for a cut in Japan's rate from its existing level of 0.5 per cent - which is already the lowest for any industrialised economy in the world. While expectations are building up for further rate cut in India as well, bankers here believe that a zero-level rate does not seem likely even remotely. "That (zero per cent interest rate) looks very difficult in India. Given the liquidity situation and macroeconomic factors, interest rate below one per cent seems a highly unlikely proposition," the UCO Bank chairman and managing director, Mr S.K. Goel, said. But, it is not the case with the US and Japan, as well as some other economies where a zero-interest rate is being talked as quite a possibility in the current economic scenario when borrowers are hard to find and liquidity is not enough. Under a zero interest rate policy, which is also known as Quantitative Monetary Easing Policy, a central bank uses money supply, rather than interest rate as a key monetary easing tool. However, a zero ben-chmark rate does not guarantee nil interest cost for consumers or corporate bo-rrowers. It applies only to banks parking their funds with the apex bank and borrowing from each other. The expectations for a zero rate are getting a boost from the fact that central banks across the world are nowadays taking concerted efforts to cut their benchmark rate in a bid to fight the global credit crisis. At least a dozen central banks across the world have slashed their rates to sub-five per cent level in the past few days. - PTI http://www.asianage.com/presentation/leftnavigation/news/business/world-closer-to-zero-rate.aspx Rich get experience. Experienced get rich. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
