I know many keep track of this but I thought I'd mention that the the exchange rate as of now is 1 Euro = $1.08. It was as low as $1.05 but the Euro rebounded 3 cents.

The ECB (European Central Bank) lowered interest rates from -.2% to -.3% (yes, that is a negative interest rate). If the Fed goes through raising our interest rates to .25%, look for the USD to go to parity or higher above the EUR.

Current fed funds target range is 0 to .25 % - actual rate has been less than .25% - maybe in .13% range - I do not know. What is expected at December meeting is raise of target range to .25 to .5% - actual rates may be close to .5%. Hard to believe this change can really make much difference to markets at this point - but if I knew how markets are going to react I would be visiting my own island in Caribbean.

So how does a negative interest rate work? Do they pay you to borrow money?

Non Candu, you pay to leave money on an account. Then someone else borrows the money and pays for it.

The Bank in the middle makes a nice profit.

"Don't tell my mom I work for a Bank, she still thinks I play piano in a whorehouse"

-- Popular saying after the 1930's bank crashes.

visiting? I'd OWN one!

Oh yeah - I would own it - but only visit from time to time off my 300 foot yacht.

The reason for a negative interest rate is that you won't leave your money in a bank account. They figure since you will loose money by leaving it in your bank account, you will instead spend your money therefore stimulating the economy.

We already have what wilsonck describes, just less obvious. If you have money in a savings account earning .05% when inflation is 1% to 2% you have what is effectively a negative interest rate. And here in Canada, the government wonders why we aren't saving <img src="http://www.traveltalkonline.com/forums/images/graemlins/hammer.gif" alt="" />

Many argue the one thing worse than inflation is deflation. The Japanese have been dealing with that for close to two decades. Their govt actually handed out stimulus checks to get them to buy things and try to pump up prices but the vast majority used the checks to pay routine expenses as the prices for everything continued to drop. I think they got a recent uptick in inflation after all these years.

Also, I always thought the FED had an interest rate dial but what they actually do is buy or sell Treasuries to increase or lower the money supply which results in an interest rate change. So basically, they will quit buying as many treasuries. The scary part is they can buy an unlimited amount of treasuries - this is known as "printing money". So what they will do is decrease the rate of printing money. NEED A TTOL ECONOMICS SECTION.

Worse for whom? The decline in the price of gasoline is great for some and horrible for others. Deflation in larger economy is different issue perhaps but a supposed risk of deflation has been used to justify actions which are not necessarily the best.

I agree, the late Salih N. Neftçi, my Marco-economics professor explained how to use interest rates to fight inflation: "If a horse drinks too much you can kick it so it stops, but if it refuses to drink, you are done.."

What a great explanation!

There are so many problems with any government manipulating interest rates, but getting into that is probably beyond the scope of a travel forum <img src="http://www.traveltalkonline.com/forums/images/graemlins/Smile.gif" alt="" />