Markets in a Minute

Visualizing Interest Rates by Country in 2021

Published

4 years ago

May 13, 2021

Dorothy Neufeld

Interest Rates by Country

Visualizing Interest Rates by Country in 2021

Going as far back as the 14th century, pandemics have been found to have a negative effect on interest rates.

History shows that this effect is even greater than that of financial crises. Across a study of 19 pandemics since the mid-1300s, real interest rates fell an average of 1.5 percentage points lower in the following two decades than they would have otherwise. And yet, even before COVID-19, structural forces, such as rising debt, were causing interest rates to fall.

The above Markets in a Minute chart from New York Life Investments shows interest rates by country in 2021.

How Have Interest Rates Changed?

Broadly speaking, the majority of countries’ short-term interest rates have declined since COVID-19 began. Using data from CEIC as of April 2021, short-term interest rates are measured by three-month money market rates where available.

Interest rate change Apr 2020 – Mar 2021

Interest rates fell: 69 countries
Interest rates increased: 10 countries
Interest rates stayed the same: 3 countries

Across nearly every continent, interest rates have decreased as central banks enacted measures to combat the economic fallout of COVID-19.

Country/ Region	Short-Term Interest Rate Mar 2021 (%)*	Short-Term Interest Rate Apr 2020 (%)**	Interest Rate Change 2020-2021 (%)
Argentina	31	12.4	18.6
Australia	0.0	0.1	-0.1
Austria	-0.5	-0.3	-0.2
Bangladesh	0.7	7.1	-6.4
Belarus	13.9	10.6	3.3
Belgium	-0.5	-0.3	-0.2
Bolivia	11.5	8.6	2.9
Botswana	3.5	4.4	-0.9
Cambodia	1.8	1.6	0.2
Canada	0.1	0.3	-0.2
China	2.6	1.4	1.2
Colombia	1.8	4.6	-2.8
Costa Rica	3.6	4.1	-0.5
Cyprus	-0.5	-0.3	-0.2
Czech Republic	0.4	0.9	-0.5
Denmark	-0.2	-0.4	0.2
Ecuador	1.0	1.3	-0.3
Egypt	9.9	9.6	0.3
Estonia	-0.5	-0.3	-0.2
Finland	-0.5	-0.3	-0.2
France	-0.5	-0.3	-0.2
Georgia	8.0	9.0	-1.0
Germany	-0.5	-0.3	-0.2
Greece	-0.5	-0.3	-0.2
Hong Kong	0.2	1.7	-1.5
Hungary	0.8	1.1	-0.3
Iceland	1.4	2.4	-1.0
India	3.7	5.3	-1.6
Indonesia	3.8	4.9	-1.1
Ireland	-0.5	-0.3	-0.2
Israel	-0.1	0.1	-0.2
Italy	-0.5	-0.3	-0.2
Japan	-0.1	0.1	-0.2
Jordan	4.6	4.7	-0.1
Kenya	6.9	7.2	-0.3
Kosovo	-0.5	-0.3	-0.2
Kuwait	1.5	1.8	-0.3
Latvia	-0.5	-0.3	-0.2
Lithuania	-0.5	-0.3	-0.2
Luxembourg	-0.5	-0.3	-0.2
Macau SAR	0.3	1.7	-1.4
Malaysia	1.9	2.8	-0.9
Malta	-0.5	-0.3	-0.2
Mauritius	0.1	1.2	-1.1
Mexico	4.2	6.2	-2.0
Moldova	7.0	8.0	-1.0
Montenegro	-0.5	-0.3	-0.2
Morocco	1.5	2.0	-0.5
Mozambique	13.3	10.0	3.3
Nepal	1.1	2.1	-1.0
Netherlands	-0.5	-0.3	-0.2
New Zealand	0.3	0.3	0.0
Nigeria	6.9	10.1	-3.2
Norway	0.4	1.4	-1.0
Pakistan	7.6	8.2	-0.6
Panama	0.2	0.7	-0.5
Philippines	1.2	3.2	-2.0
Poland	0.2	0.7	-0.5
Portugal	-0.5	-0.3	-0.2
Qatar	1.1	1.1	0.0
Romania	1.7	2.5	-0.8
Russia	4.7	6.7	-2.0
Saudi Arabia	0.8	1.2	-0.4
Serbia	0.9	1.2	-0.3
Singapore	0.4	0.9	-0.5
Slovakia	-0.5	-0.3	-0.2
Slovenia	-0.5	-0.3	-0.2
South Africa	3.8	4.2	-0.4
South Korea	0.8	1.0	-0.2
Spain	-0.5	-0.3	-0.2
Sweden	-0.2	0.3	-0.5
Switzerland	-0.8	-0.7	-0.1
Taiwan	0.5	0.5	0.0
Thailand	0.6	0.9	-0.3
Turkey	20	8.4	11.6
UAE	0.3	1.9	-1.6
United Kingdom	0.1	0.6	-0.5
United States	0.0	0.1	-0.1
Uruguay	5.0	10.1	-5.1
Venezuela	73.8	23.5	50.3
Vietnam	1.7	4.2	-2.5
Zambia	14.0	16.5	-2.5

Source: CEIC (Apr, 2021)
*Bolivia, Botswana, Costa Rica, Japan, Mauritius, Nepal, Qatar, Russia, Slovakia, Zambia have most recent data as of Feb ’21
**Costa Rica, Denmark, Mauritius, Norway & Russia have 2020 data as of Mar 2020

In the U.S., interest rates fell to record lows, dropping by 0.1 percentage points between April 2020 and March 2021. As vaccine rollouts accelerated in 2021, real GDP grew by an annual rate of 6.4% in the first quarter. Unemployment slightly improved to 6.1%, but still remains well above pre-pandemic levels of 3.5%.

Given these variables, the question of whether interest rates will rise is an open one.

Like the U.S., interest rates in the European Union declined, although at a greater rate—from -0.3% to -0.5%. To help improve economic conditions, the European Central Bank promises to purchase $2.2 trillion in government bonds until March 2022.

Together, the euro area, the U.S., Japan, and Britain have produced at least $3.8 trillion in new money supply since early 2020.

Interest Rates: The Steepest Gains and Declines

As money creation and low interest rates have become increasingly common phenomena, the focus has shifted to inflation.

With interest rates reaching 343% in 2020, Venezuela has been a poster child for hyperinflationary forces. Energy shortages only compounded the effect which was well underway before the pandemic. Between April 2020 and March 2021, interest rates jumped over 50 percentage points.

In addition, Turkey and Brazil raised interest rates in March 2021 to dampen inflation. Interest rates in Turkey have increased 11.6 percentage points over the time frame, one of the highest absolute changes globally.

In 2020, the lira faced historic declines, causing the price of imports to climb significantly.

Interest Rates by Country

On the other hand, Bangladesh has seen its interest rates decline 6.4 percentage points, the steepest drop across the dataset. To help offset the effects of COVID-19, the Bangladesh Bank lowered interest rates from 7.1% to 0.7%.

With rates falling 3.2 percentage points, Nigeria has also seen one of the greatest interest rate drops. In March, Fitch Ratings gave the country a B rating with a stable outlook, supported by its low government debt-to-GDP ratio and large economy.

Research has found that countries with better credit ratings and transparent fiscal infrastructure had greater ability for central banks to lower interest rates in response to the crisis.

Sign of the Times

Policy rate changes, a key central bank maneuver, have been an important tool in response to COVID-19.

As economic activity in some countries picks up, interest rates could rise. However, progress in vaccination distribution remains uncertain, especially in emerging markets.

In tandem with this, global central banks are applying unproven monetary policy frameworks, including money creation and large-scale bond purchases. While studies show that interest rates have been falling over the past several centuries, the confluence of these factors will be revealing in the years that follow.

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Markets in a Minute

The Average American’s Financial Portfolio by Account Type

From retirement plans to bank accounts, we show the percentage of an American’s financial portfolio that is typically held in each account.

Published

7 months ago

September 11, 2024

Jenna Ross

The Average American’s Financial Portfolio by Account Type

Where does the average American put their money? From retirement plans to banks, the typical financial portfolio includes a variety of accounts.

In this graphic from Morningstar, we explore what percentage of a person’s money is typically held within each account.

Breaking Down a Typical Financial Portfolio

People put the most money in employer retirement plans, which make up nearly two-fifths of the average financial portfolio. Bank accounts, which include checking, savings, and CDs, hold the second-largest percentage of people’s money.

Account Type	% of Financial Portfolio
Employer retirement plan	38%
Bank account	23%
Brokerage/investment account	14%
Traditional IRA	10%
Roth IRA	7%
Crypto wallet/account	4%
Education savings account	3%
Other	1%

Source: Morningstar Voice of the Investor Report 2024, based on 1,261 U.S. respondents.

Outside of employer retirement plans and bank accounts, the average American keeps nearly 40% of their money in accounts that advisors typically help manage. For instance, people also hold a large portion of their assets in investment accounts and IRAs.

Account Insight for Advisors

Given the large focus on retirement accounts in financial portfolios, advisors can clearly communicate how they will help investors achieve their retirement goals. Notably, Americans say that funding retirement accounts is a top financial goal in the next three years (39% of people), second only to reducing debt (40%).

Americans also say that building an emergency fund is one of their financial goals (35%), which can be supported by the money they hold in bank accounts. However, it can be helpful for advisors to educate clients on the lower return potential of savings accounts and CDs. In comparison, advisors can highlight that investment or retirement accounts can hold assets with more potential for building wealth, like mutual funds or ETFs. With this knowledge in mind, clients will be better able to balance short-term and long-term financial goals.

The survey results also highlight the importance of advisors staying up to date on emerging trends and products. People hold 4% of their money in crypto accounts on average, and nearly a quarter of people said they hold crypto assets like bitcoin. Advisors who educate themselves on these assets can more effectively answer investors’ questions.

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Markets in a Minute

5 Factors Linked to Higher Investor Engagement

Engaged investors review their goals often and are more involved in decisions, but which factors are tied to higher investor engagement?

Published

8 months ago

August 22, 2024

Jenna Ross

Partial bar chart showing the factors linked to higher investor engagement along with a picture of a man looking at a cell phone.

5 Factors Linked to Higher Investor Engagement

Imagine two investors. One investor reviews their investment goals every quarter and actively makes decisions. The second investor hasn’t reviewed their goals in over a year and doesn’t take part in any investment decisions. Are there traits that the first, more involved investor would be more likely to have?

In this graphic from Morningstar, we explore five factors that are associated with high investor engagement.

Influences on Investor Engagement

Morningstar scores their Investor Engagement Index from a low of zero to a high of 100, which indicates full engagement. In their survey, they discovered five traits that are tied to higher average engagement levels among investors.

Factor	Investor Engagement Index Score (Max = 100)
Financial advisor relationship	Don’t work with financial advisor: 63
	Work with financial advisor: 70
Sustainability alignment	No actions/alignment: 63
	Some/full alignment: 74
Trust in AI	Low trust: 61
	High trust: 74
Risk tolerance	Conservative: 62
	Aggressive: 76
Comfort making investment decisions	Low comfort: 42
	High comfort: 76

Morningstar’s Investor Engagement Index is equally weighted based on retail investors’ responses to seven questions: feeling informed about composition and performance of investments, frequency of investment portfolio review, involvement in investment decision-making, understanding of investment concepts and financial markets, frequency of goals review, clarity of investment strategy aligning to long-term goals, and frequency of engagement in financial education activities.

On average, people who work with financial advisors, have sustainability alignment, trust AI, and have a high risk tolerance are more engaged.

The starkest contrast was that people with high comfort making investment decisions have engagement levels that are nearly two times higher than those with low comfort. In fact, people with a high comfort level were significantly more likely to say they were knowledgeable about the composition and performance of their investments (84%) vs. those with low comfort (18%).

Personalizing Experiences Based on Engagement

Advisors can consider adjusting their approach depending on an investor’s engagement level. For example, if a client has an aggressive risk tolerance this may indicate the client is more engaged. Based on this, the advisor could check if the client would prefer more frequent portfolio reviews.

On the other hand, soft skills can play a key role for those who are less engaged. People with low comfort making investment decisions indicated that the top ways their financial advisor provides value is through optimizing for growth and risk management (62%), making them feel more secure about their financial future (38%), and offering peace of mind and relief from the stress of money management (30%).