International Business

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International Business
The Federal Reserve System is United States Of America Central Bank that determines the amount of interest rates that is supposed to be given to the clients of the other banks operating in the country. The lending rates reduction is aimed at reducing the burden of the bank customers and at the same time encourages local and foreign investors in investing in the country (Ball, 20). While the European Central Bank is the main bank that controls that amount of interests that is charged by the banks to the clients.
The Federal Reserve System is concentrating on reducing its interest’s rates to the banks in America while the European central bank has a fixed interest rate on its clients thus not reducing the rates; this is seen to be a way in which the US dollar becomes a little bit stronger as compared to the European pound (Ball, 122).
The Effects of this policy will result to the strengthening of the US Dollar against the Pound; this is because the low rates will encourage the country’s borrowers to borrow and at the same time discourage savers (Ball, 250). How will the policy improve the US dollar? The lower the interest rates the more the level of borrowing and the more the borrowers the more the spending, which will automatically results to an improved economy. This will definitely result to an increase in the numbers of investors in America thus leading to growth of the country’s economy.
Why is the dollar expected to gain? The reason that makes it possible for th...