Why are interest rates on high yield savings accounts higher in the US than in the EU while USD TO EUR remains relatively stable?
In: Economics
The high rates in the US don’t have to do with the exchange rate. It’s because the federal reserve in the US is keeping the interest rate high. The interest rate they set determines the return rate for government bonds. So when interest rates are high like now, government bonds will offer good returns, and if a savings account is lower yield people will take their money out to buy bonds. But when interest rates are high banks can also make a ton of money by giving out loans and earning those higher interest payments, so they really want your money in their bank. They raise returns on those accounts until they are about the same as the return on short term bonds.
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