As of October 2015, the interest rate (also known as the federal funds rate) in the United States is 0.25%, remaining unchanged since December 2008. The Federal Reserve System sets the interest rate as a form of monetary policy with the goal of managing the inflation rate, maximizing employment and stabilizing banking systems. To adjust to a growing economy, a country’s central bank can decide to raise its national interest rate, signifying that policymakers are forecasting a positive future economic outlook in terms of increasing employment and increasing inflation rates.
Currently, there are only 10 countries in the world with interest rates lower than 0.25%. In the past six months, the countries with the lowest interest rates in the global economy have not moved substantially. Future increases in the interest rate of the U.S. would prompt investors holding funds overseas to reallocate assets into U.S. financial instruments. Likewise, increases in the interest rate in another country would encourage foreign investment into that nation’s loans, savings accounts and mortgages.
Singapore (SIBOR Reference Rate: 0.21%)
Singapore's interest rate is reflective of the country's quarterly growth of 0.1%, the slowest since the first quarter of 2012. Singapore's interest rate is not projected to increase markedly for the next period, as policymakers assume a nonaggressive approach toward the appreciation of the Singapore dollar.
Panama (Money Market Rate: 0.18%)
With Panama's shrinking inflation rate in October 2015 at a reported -0.4%, the fall in consumer prices mirrors a previous month of deflationary behavior in February 2015, when inflation dropped 0.4%.
Israel (Benchmark Interest Rate: 0.1%)
The interest rate in Israel has been steadily falling since the end of 2011, when it was 3.25%. The Bank of Israel has only reduced the interest rate since then, with the current rate of 0.1% remaining level since March 2015 and reaching a record low since 1996.
Euro Area (Benchmark Interest Rate: 0.05%)
Consisting of all countries that have chosen to adopt the euro, the Euro Area's economic metrics are an important indicator for multiple countries in Europe. (Other European countries on this list are outside of the Euro Area.) The Euro Area's interest rate, fixed by the Governing Council of the European Central Bank, has remained at a low of 0.05% since September 2015. Recent statements issued by the president of the European Central Bank, Mario Draghi, express concerns over assets placed in volatile emerging markets, and the outlook of economic growth appears to be largely negative.
Czech Republic (Repo Rate: 0.05%)
The Czech Republic has also experienced a record low interest rate since 1995, with an interest rate of 0.05% reflective of a modest core inflation rate of 0.15% and a gross domestic product (GDP) growth rate at 1.1%.
Bulgaria (Benchmark Rate: 0.01%)
The interest rate in Bulgaria experienced a rapid decline from the end of 2008 to the beginning of 2010 until it bottomed at 0.18% in the first quarter of 2010. It has since fallen below 0.1% since the third quarter of 2012.
Japan (Discount Rate: 0%)
With Japan's interest rate flat-lining at 0% since 2011 after making a short appearance between 0.1 and 0.5% between the first quarter of 2009 and the third quarter of 2010, as part of a purposeful zero interest-rate policy making its debut in 2009, the Japanese economy has experienced a number of quarters with negative GDP growth. The most recent was 0.3% in the second quarter of 2015, one of 10 negative GDP quarters since 2010.
Sweden (Benchmark Rate: -0.35%)
Sweden's interest rate fell below 0% in February 2015 and it then steadily declined toward the current rate of -0.35%. The Executive Board of the Riksbank announced it would be purchasing government bonds until the end of 2015, and inflation is expected to rise.
Denmark (Benchmark Rate: -0.75%)
Denmark has held its negative interest rate of -0.75% since March 2015. It reflects an effort on behalf of the National Bank of Denmark to control inflation rates. The rate was once above 5% in 2009 and has declined in conjunction with the government budget, which has also shrunk since 2009.
Switzerland (Benchmark Rate: -0.75%)
The beginning of 2015 marked the fall of the interest rate in Switzerland from 0 to -0.75%. Before the fall, the interest rate had been kept steady at 0% since the third quarter of 2011. An overvalued Swiss franc has been cited as being a partial culprit for the consistently low interest rate.