These are highly unusual times as far as interest rates are concerned. Interest rates are at the lowest levels seen during the last 5,000 years. This is a result of the extraordinary stimulus measures that have been taken by a number of central banks to boost anemic economic growth and snuff out the possibility of deflation.
According to Trading Economics, the following five countries have the lowest interest rates:
Switzerland: The Swiss National Bank reported an unchanged benchmark three-month Libor of -0.75 percent as of September 2018. According to the central bank, the Swiss franc is highly valued in foreign exchange markets. Inflation forecasts were lowered for 2019 to 0.8% from 0.9% and for 2020 to 1.2% from 1.6%. Inflation for 2018 was 0.9%, and the GDP growth prediction for 2018 was increased from 2.5% to 3% from 2%. Interest rates in Switzerland averaged 0.8% from 2000 until 2018. The interest rate was highest in June 2000 when it reached 3.5% and lowest in January 2015 when it was -0.75%.
Denmark: The benchmark interest rate in Denmark was -0.65 percent when last recorded in 2018. The interest rate in Denmark averaged 2.81% from 1992 until 2018. The interest rate was highest in November 1992 when it reached 15% and lowest in February of 2015 at -0.75%.
Sweden: The central bank of Sweden reported a benchmark interest rate of -0.5% in September 2018. Sweden's economy is strong, and inflation is close to the central bank's 2% target. However, the central bank plans to continue its expansionary monetary policy and raise the repo rate by 25bps late in 2018 or early 2019. The interest rate in Sweden averaged 3.14% from 1994 until 2018 and was highest in July 1995 when it reached 8.91% and lowest in February 2016 at -0.50%.
Japan: The Bank of Japan reported an unchanged interest rate at -0.1% in September 2018 keeping the 10-year target for the Japanese government bond yield at around zero. Inflation in Japan is well below the 2% target rate; therefore, the Bank of Japan plans to retain a very low interest rate for an extended period. The interest rate in Japan averaged 2.82% from 1972 until 2018. The Japan interest rate was highest at 9% in December 1973 and lowest at -0.10% in January 2016.
Israel: The central bank of Israel announced an unchanged benchmark interest rate of 0.1% in August 2018. The inflation rate was approaching the target range of 1% to 3%. The annual inflation rate reached 1.4% in mid-2018, the highest since August 2017 when deflation ended. However, the central bank reported that a significant appreciation of the shekel could increase inflation. Overall, the country's economy has improved with a tight labor market and increasing wage levels. The interest rate in Israel averaged 5.63% from 1996 until 2018. It was highest in June 1996 when it reached 17% and lowest in February 2015 when the interest rate was 0.10%.
The Bottom Line
The Federal Open Market Committee, the agency responsible for the U.S. Federal Reserve’s monetary policy, continues to signal an improving economy by keeping the U.S. interest rate low. However, it will be a long time until market-driven “normal” interest rates return. The Fed does not expect to reach a 3% interest rate until after 2020. Policy-wise, this means an extended period of low savings rates and continued high taxation.