Rising Interest Rates: 4 Impacts for 2022 & Beyond
• 2022 was a year of high inflation which led to higher interest rates.
• These rising rates had several impacts on the world, including making Futures trading more expensive, causing house prices to decline, and strengthening the US dollar.
• Other effects include increased borrowing costs and reduced economic growth.
Impact of Rising Interest Rates in 2022
Futures Trading More Expensive
Higher interest rates increase the cost of leverage, meaning traders need more capital to enter into Futures contracts when interest rates are high. This increases the Futures margin and makes trading more challenging.
House Prices Set to Decline
Interest rates affect property prices by influencing borrowing costs and demand for money. Low-interest rates made mortgages attractive, driving up property demand and prices in 2022. However, analysts predict these rising rates will catch up with the market in 2023, leading to a 10% drop in UK house prices and a 4.5% drop in US homes.
US Dollar Gained Strength
When interest rates are high, investors can earn higher returns by holding that currency – increasing its relative value compared to other currencies. In 2022, this happened with USD due to rising US interest rates – it gained strength against many other currencies.
Increased Borrowing Costs
Businesses and consumers also felt the impact of rising interest rates in 2022 as borrowing costs increased significantly – reducing consumer spending power and dampening economic growth around the world.
Rising interest rate had a significant effect on global markets in 2022, leading to increased borrowing costs, declining house prices, strengthened USD currency value and more expensive futures trading – all impacting both businesses and consumers across the world