Download Forecasting Interest Rates

WHY DO INTEREST RATES CHANGE: INDICATORS &
FACTORS
GROSS DOMESTIC PRODUCT: GDP measures the output of goods and services produced by labour
and property located in a country. It is the most important economic indicator.
CONSUMER PRICE INDEX: CPI is a measure of the average change over time in the prices paid by
urban consumers for a fixed market basket of consumer goods and services. It is the most important
measure of inflation. A higher than expected CPI or an increasing trend is inflationary and may cause
bond prices to fall and yields to rise, likewise, a lower than expected CPI may cause interest rates to
fall.
PRODUCER PRICE INDEX: PPI is a family of indexes that measures the average change over time in
the selling prices received by domestic producers of goods and services, that measure price change
from the perspective of the seller. It can be volatile.
EMPLOYMENT SITUATION:
Payroll employment Together with the unemployment rate, this is the most important indicator of current
economic trends each month; a higher than expected monthly increase or an increasing trend
upwards, is considered inflationary, and can cause bond prices to fall and yields and interest rates to
rise. A smaller than expected rise can cause yields and interest rates to fall.
Unemployment rate the unemployment rate is a lagging indicator. It shows the number of unemployed
people by occupation, industry, duration of unemployment and reasons for unemployment. A lower
than expected unemployment rate or declining trend is considered inflationary and could cause bond
prices to fall and yields and interest rates to rise.