This report presents the current annual interest rates charged by the central banks of the top 25 richest countries. In a nutshell, interest rates define the price of money.
At a macroeconomic level, central banks use their current annual interest rates (sometimes called discount rates) to shape monetary policy. Central bank interest rates also impact bank reserves, monetary growth and market interest rates for the country which the central bank governs.
Interest rates are one the critical leading indicators for the health of a country’s economy, foreshadowing an impending boom period, recession or worse.
Our focus is on the interest rate which banks in each country must pay to borrow money from its respective central bank. In the case of the European Union members, the European Central Bank sets the benchmark interest rate.
Influenced by but distinct from the pertinent central bank rate, commercial banks for each economy set their own prime lending rates on loans to their most creditworthy customers. These other separate types of rates are sometimes called the commercial bank prime lending rates.
According to The Economist, a country’s interest rates have probably the most direct and visible effect on that nation’s currency exchange rates. Beyond that, interest rates serve as a leading economic indicator that pass their low point and then start to go up approximately 18 months before a country’s Gross Domestic Product output hits its peak.
Richest Countries’ Central Bank Interest Rates
Listed below are the central bank interest rates for the world’s 25 biggest economies. Percentage rates shown are annual and were in effect as of the dates shown.
You can change the presentation order by clicking the triangle icons at the top of each column. Starting with the largest economy, the Rank column refers to the relative size of each country in terms of Gross Domestic Product (GDP) on a Purchasing Power Parity basis.
| Rank | Country | Interest Rate | As of |
|---|---|---|---|
| 1 | China | 4.15% | Feb. 2020 |
| 2 | United States | 1.75% | Jan. 2020 |
| 3 | India | 5.15% | Feb. 2020 |
| 4 | Japan | -0.10% | Jan. 2020 |
| 5 | Germany | 0% | Jan. 2020 |
| 6 | Russia | 6% | Feb. 2020 |
| 7 | Indonesia | 5% | Jan. 2020 |
| 8 | Brazil | 4.25% | Feb. 2020 |
| 9 | United Kingdom | 0.75% | Jan. 2020 |
| 10 | France | 0% | Jan. 2020 |
| 11 | Mexico | 6.85% | Jan. 2020 |
| 12 | Italy | 0% | Jan. 2020 |
| 13 | Turkey | 11.25% | Jan. 2020 |
| 14 | South Korea | 1.25% | Jan. 2020 |
| 15 | Spain | 0% | Jan. 2020 |
| 16 | Canada | 1.75% | Jan. 2020 |
| 17 | Saudi Arabia | 2.25% | Dec. 2019 |
| 18 | Iran | 18% | Dec. 2019 |
| 19 | Egypt | 12.25% | Jan. 2020 |
| 20 | Thailand | 1% | Feb. 2020 |
| 21 | Australia | 0.75% | Feb. 2020 |
| 22 | Taiwan | 0.0138 | Dec. 2019 |
| 23 | Poland | 1.5% | Feb. 2020 |
| 24 | Nigeria | 13.5% | Feb. 2020 |
| 25 | Pakistan | 13.25% | Dec. 2019 |
Germany, France, Italy and Spain are 4 European Union members. The European Central Bank has reduced policy interest rates to zero in order to boost economic growth.
In contrast, the prime interest rate for the departing ex-member United Kingdom is 0.75% as of January 2020.
Ruchir Agarwal and Signe Krogstrup, writers for the International Monetary Fund blog, explain that severe recessions have historically required a 3 to 6 percentage cut in the central bank interest rate. This means that few of the world’s richest economies have sufficient room to loosen their monetary policy strings as a way to counteract another severe global economic shock.
One possible workaround is negative interest rates. Negative interest rates refer to a scenario in which central banks incur a charge for storing money with the borrowing banks instead of the usual collecting of interest for loans they grant to those commercial banks.
Applying the above listing, Japan’s central bank imposed a negative interest rate in its bid to keep the Japanese economy growing.
Richest Countries’ Central Banks Identified
The following searchable table shows the central bank for each of the 25 wealthiest economies by GDP on Purchasing Power Parity basis.
These central banks aspire to shape monetary conditions by setting the interest rates they charge on money lent to commercial banks.
| Rank | Country | Central Bank Authority |
|---|---|---|
| 1 | China | People's Bank of China |
| 2 | United States | Federal Reserve |
| 3 | India | Reserve Bank of India |
| 4 | Japan | Bank of Japan |
| 5 | Germany | European Central Bank |
| 6 | Russia | Bank of Russia |
| 7 | Indonesia | Bank of Indonesia |
| 8 | Brazil | Central Bank of Brazil |
| 9 | United Kingdom | Bank of England |
| 10 | France | European Central Bank |
| 11 | Mexico | Bank of Mexico |
| 12 | Italy | European Central Bank |
| 13 | Turkey | Central Bank of Rep. of Turkey |
| 14 | South Korea | Bank of Korea |
| 15 | Spain | European Central Bank |
| 16 | Canada | Bank of Canada |
| 17 | Saudi Arabia | Saudi Arabian Monetary Authority |
| 18 | Iran | Central Bank of Islamic Rep. of Iran |
| 19 | Egypt | Central Bank of Egypt |
| 20 | Thailand | Bank of Thailand |
| 21 | Australia | Reserve Bank of Australia |
| 22 | Taiwan | Central Bank of Rep. of China (Taiwan) |
| 23 | Poland | National Bank of Poland |
| 24 | Nigeria | Central Bank of Nigeria |
| 25 | Pakistan | State Bank of Pakistan |
Central bank interest rates are typically decided at regular meetings. For instance, both the Bank of England’s monetary policy committee as well as the European Central Bank conduct monthly meetings.
Economists keenly peruse the latest minutes documenting central bank rate-setting meetings. Specifically, they look for signals that indicate central bankers’ thinking on the state of the economy and the future of direction of interest rates.
Central Bank Rates: Faster Access, More Complex, Harder to Control
The Economist details why financial systems worldwide have changed dramatically since the 1970s.
Major change events include:
- Liberalization and deregulation in major industrialized nations;
- New financial product innovations including derivatives, futures and options; and
- Technological changes enabling quick and inexpensive transactions via ubiquitous computers and lightning-fast telecommunications.
Consequently, the world’s financial markets have evolved to become much more integrated. When a central bank changes interest rates be it in the United States, Japan or a European Union member country, there is an immediate ripple effect around the globe.
On the other side of the coin, it is much more difficult for central banks to control monetary variables within a given country. Another ongoing trend seems to be that the demand for money is less sensitive to central bank interest rates in the home economy.
See also Exchange Rates for Top 25 Richest Countries, Inflation Rates for Top 25 Richest Countries and Latest Richest Countries by GDP per Capita
Research Reference Materials:
Central Intelligence Agency, The World Factbook Country Comparison: Central Bank Discount Rate. Accessed on February 12, 2020
European Central Bank, Official Interest Rates: Key ECB Interest Rates. Accessed on February 12, 2020
global-rates.com, Central banks – summary of current interest rates). Accessed on February 12, 2020
International Monetary Fund blog, Cashing In: How to Make Negative Interest Rates Work. Accessed on February 12, 2020
Organisation for Economic Co-operation and Development, Key Short-Term Economic Indicators: Long-term interest rates. Accessed on February 12, 2020
The Economist, Guide to Economic Indicators: Making Sense of Economics (7th Edition). Accessed on February 12, 2020
Trading Economics, Economic Indicators by Category: Interest Rate. Accessed on February 12, 2020
Wikipedia, List of central banks. Accessed on February 12, 2020
Wikipedia, List of countries by central bank interest rates. Accessed on February 12, 2020