How the policy makers and investors look at the observed levels of interest rates in the market?

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How the policy makers and investors look at the observed levels of interest rates in the market?
Introduction
Observed levels of interest rates are used by central banks as a regulatory mechanism in the process of controlling the economy. Simply put, these rates dictate the price of currency, and through policies from the central bank, economic stimulation can be possible, while also restraining the same is possible, this only happens when the expansion is rapid. Investors contend with the varied levels of interest rates to ensure investment in their different portfolios. With low-interest rates, central banks stimulate spending, and this applies when returns are low, leading to investments, because with low returns investors are always discouraged to save. This kind of spending leads to moderate inflation levels and increased growth in the economic segment. Also, the channel of exchange rates proposes that with interest rates that are at a minimum, investors and economists should expect depreciation levels in their currencies because capital is often channeled to markets that have yields that are higher. Depreciated currencies lead to cheaper products domestically thereby leading to increased exports and economic growth. It, therefore, follows that investment agents and policy makers have similar views on the rates of interest, and this is true because of their similar stand on economic growth.
Implications of Interest Rates from Investors and Economists viewpoints
In the US, the financial system is kept afloat by the Federal Reserve through the use of different tools.

Such tools allow for different changes in their monetary policies to ensure full implementation of the nation’s fiscal policies. Included in this bracket are the levels of interest in the banks, distribution and production of their money, information dissemination and the overall growth of the economy. All these facets become possible because of the changes that they effect on the discount rate. The discount rate has become an important tool that is being used by the central bank, to ensure interest rate changes, which also affects the borrowing and spending levels of all their citizens. The economists from the central bank, therefore, operate fully on the premise of the operating percentages of interest in the market (Friedman 10).
Investors, on the other hand, are affected by high rates of interest, because with such provisions organizations around the globe are forced to have the cost of capital that is high. Such conditions mandate that investors work harder to earn considerable returns in their portfolio, to avoid losing more profits. With low flows of cash and profits, investors can end up having stock options that are depressed. Investors often require risk premiums that are high when rates of interest shoot up, leaving companies in debt, and such scenarios can easily affect stock values further down. However, with observed rates that are high, economies can operate sluggishly, and this may prevent people from spending, leading to low share prices and profits in the long run.
Lower interest rates and Economic Growth
Interest rates that are lower often allow people to borrow cheaply, and with enough money in their pockets, borrowers can easily invest while spending leading to economic growth levels that are high (Kuttner 525). It is also vital to note that such instances can lead to aggregate demands that are high, with a possibility of inflationary pressure. Also, low rates of interest easily discourage saving, as low rates are often expected from the savings. With such a mentality, consumers will decide to spend their money instead of saving. Further, such rates are usually attached with borrowing costs that are low and companies coupled with consumers can get more financing which they can decide to use for investment purposes or spending, and all these will lead to higher growth levels in the economy. Lastly, mortgage repayments costs can be lowered by low rates of interest, and this can give room for consumers to spend because of their increased levels of disposable currencies.
Other ways of ensuring Economic Growth
Nations through their policy advisors and economists need to start promoting innovations in their regions because such innovations bring about new ideas that can propel the economy to higher heights in the future (Eggertsson et al. 140). Further, the US, in particular, requires a streamlined reform on their immigration segment to allow immigrants who have skills to live and operate from the nation. Most nations across the globe fight to have immigrants who are skilled in different facets to ensure professionalism and increased revenue in the long run. The stand on the US government to deny immigrants a place in their economy can harm their recovery and future growth.
It is vital to note that drugs have an adverse effect on the economy, as nations spend millions to incarcerate the affected. The US has spent billions of shillings in this sphere, and currently needs to legalize and tax different drugs that are under consumption, and with this, they can increase their revenues by higher margins. Finally, cutting down costs of special services like health care will go a long way in ensuring spending by the majority leading to increased growth levels.
Low-interest rates, the yield curve, and investors
Investors are required to be keen on the yield curve, similarly as to their indexes, when they want to see how the market is moving. Through the yield curve, investors can learn how to operate in the market, and fully understand the health of their economy (Paul 272). An inverted yield curve is known to have the greatest impact on investors. Under usual operations, investments that are long term in nature often bring about yields that are high. This is because of the high risks investors contend with during these long periods, hence rewarded with payouts that are high. Through an inverted curve, investors can enjoy similar returns with their short term investments through reduced premium risks. It is therefore important for investors and other players in the market to understand that the relatively low levels of interest are not to blame for the imbalances in the economy, but with policy makers approval, the Fed should work towards ensuring a steep yield curve where investors can enjoy benefits while investing both in their long and short-term portfolios.
Conclusion
Through financial theory, investors, policy makers and the Fed should understand the outcomes of steepening the yield curve and the implications of low rates of interests regarding economic growth. It is, however, vital to note that interest rates are crucial tools which can also indicate growth in a particular economy. Policy makers in the US and other parts of the world need to come up with new ways of ensuring the growth of the economy as opposed to the common policy of reducing rates of interest so as to ensure increased investment opportunities.
Works Cited
Eggertsson, Gauti B., and Michael Woodford. “The Zero Bound on Interest Rates and Optimal Monetary Policy.” Brookings Papers on Economic Activity 34.1 (2003): 139-235.
Friedman, Benjamin M., and Kenneth N. Kuttner. Implementation of monetary policy. How do central banks set interest rates? 2010. Print.
Kuttner, Kenneth N. “Monetary policy surprises and interest rates: Evidence from the Fed funds futures market.” Journal of Monetary Economics 47.3 (2001): 523-544. Print.
Paul, Sanjay. “The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, by Scott A. Shane.” Eastern Economic Journal 35.2 (2009): 271-273.