Interest rates change over time depending on market conditions and are a popular monetary tool in helping to stimulate the environment in times of economic difficulty or to contract the money supply in times of high inflation.
The world is currently going through a global pandemic, and so all countries are in a unique situation to prevent their economies from collapsing and therefore are adjusting their monetary policies to suit the times. The following are the five countries with the lowest interest rates as of November 2020.
The Swiss National Bank reported an unchanged benchmark of a three-month LIBOR of -0.75%. Inflation for 2019 was 0.36% and is expected to be 0.07% in 2021. GDP growth prediction for 2020 was meant to be between 1.5% to 2%, but now the government expects the economy to contract. Switzerland has maintained the same interest rate for the last five years.
The primary interest rate in Denmark is the certificate of deposit rate set by the Central Bank of Denmark. The current rate is -0.50%, which is an increase from the previous level of -0.75%. This is in contrast to other nations that have been relaxing monetary policy in response to the pandemic. Inflation in 2019 was 0.73% and is expected to be 1.1% in 2021.
The Bank of Japan reported an unchanged interest rate of -0.1%. The government will increase its purchasing of riskier assets and corporate bonds to reduce economic damage.
Interest rates are always set by a country's central bank unless they are part of a specific union, in which case the central bank of that union will determine the rate.
The government is also offering loans against corporate debt as collateral with rates set at 0%. Japan's inflation rate in 2019 was 0.48% and is expected to be 0.14% in 2021.
The central bank of Sweden reported a benchmark interest rate of 0%. The main interest rate in Sweden is the repo rate; the rate at which banks can borrow from the central bank for seven days.
Sweden's central bank will be purchasing additional securities in 2020 to sure up its economy against the pandemic and offering increased loans to banks. Sweden's interest rate was increased to 0% in late 2019 from -0.25%, which was the end of a five-year run of negative interest rates. Sweden's inflation rate in 2019 was 1.7% and is expected to be 1.5% in 2021.
Spain is part of the Eurozone, so its interest rate is set by the European Central Bank. The current rate for Spain is set at 0%, its rate for the last four years. This is the same rate for the entire eurozone. Spain's inflation rate in 2019 was 0.7% and is targeted at 1.02% for 2021.
The Bottom Line
The majority of the countries on this list have a negative interest rate. The countries in the eurozone currently have an interest rate of zero. The country with the lowest interest rate after the Eurozone's 0% rate is the United Kingdom, at 0.1%, followed by the U.S. at 0.25%.