Global interest rates and their effects on assets

Interest rates are not just a matter for your own country. Decisions by the Federal Reserve (Fed), the central bank of the United States, and the European Central Bank (ECB) influence asset prices worldwide. This article explains the paths through which that happens.

How a central bank decides on interest rates is covered in What central banks are and how they work. How the Selic, Brazil’s benchmark interest rate, reaches credit and the Brazilian economy is covered in The Selic rate: how it reaches credit and the economy. Here the focus is the effect of interest rates, from any country, on assets.

Where the main rates stand (as of October 8, 2026)

The most recent decisions, checked against official sources on October 8, 2026:

• United States: on September 16, 2026, the Fed raised the target range for the federal funds rate (the rate at which U.S. banks lend reserves to each other) by 0.25 percentage point, to 3.75% to 4.00% a year, by a 12–0 vote, according to the FOMC statement.
• Euro area: on September 10, 2026, the ECB raised its three key rates by 0.25 point, effective September 16, 2026. The deposit facility rate went to 2.50%, the main refinancing operations rate to 2.65% and the marginal lending facility rate to 2.90% (ECB; ECB rates table). The ECB attributed the decision to inflationary energy pressures linked to the conflict in the Middle East.
• Brazil: on September 16, 2026, the Copom (the Central Bank of Brazil’s Monetary Policy Committee) cut the Selic to 13.75% a year (Central Bank statement).

Notice that, in the same month, two major central banks raised rates and Brazil’s cut them. Interest rate cycles do not necessarily move together: each central bank responds to inflation and activity in its own economy. This article makes no forecast about future decisions or asset prices.

Interest is the price of time

Almost every financial asset is a promise of money in the future: a bond’s coupons, a company’s profits, a property’s rents. To know what that promise is worth today, the market “discounts” it by an interest rate. The higher the rate, the lower the present value of the same future cash flow. This is the logic that links interest rates to asset prices.

Fixed-income bonds

The most direct effect shows up in bonds. An example from the IMF shows the relationship: a one-year bond with a face value of US$100 and a 5% coupon pays US$105 at maturity. If the investor requires 7.1%, they pay about US$98 for the bond. If the required return falls to 3%, the same bond is worth about US$102.

In other words: price and yield move in opposite directions. When market interest rates rise, fixed-rate bonds already issued lose value. The longer the maturity, the larger this swing tends to be. Those who hold the bond to maturity receive what was agreed, barring default; those who sell earlier get the price of the day, which may be lower.

The same IMF text explains the yield curve, the set of yields by maturity. Long-term bonds usually pay more, a term premium for uncertainty about inflation and growth. An inverted curve, with short-term rates above long-term ones, can emerge after monetary tightening and reflect expectations of a slowdown. In emerging markets, the curve also carries country risk.

Stocks

According to the Fed, lower interest rates make stocks more attractive compared with other ways of holding wealth, which can raise their prices. In the opposite direction, higher rates increase competition from fixed income and make credit more expensive for companies. In the editorial team’s assessment, companies whose value depends on profits expected many years from now tend to be more sensitive to the discount rate, but each stock’s performance also depends on the business and the economic cycle.

Real estate

The Fed also describes the housing channel: changes in mortgage rates affect demand for homes and, with it, prices. Higher rates reduce how much a household can borrow on the same income.

Why U.S. interest rates carry more weight

The dollar is the world’s main funding currency. According to a 2020 report by the Committee on the Global Financial System of the BIS (Bank for International Settlements), about half of cross-border bank loans and international debt securities are denominated in dollars, even though the U.S. accounts for about a quarter of global economic activity.

This creates a direct channel. When U.S. interest rates rise, rolling over dollar debt becomes more expensive anywhere. The same report warns that borrowers without currency hedges can face exchange rate, interest rate and refinancing risk all at once. The report is from 2020; the dollar’s exact share may have changed since then.

The Fed points to another effect: changes in interest rates alter the attractiveness of U.S. assets relative to foreign ones and, with it, the exchange rate.

What happens to emerging markets

Countries like Brazil feel global tightening through several paths. In a 2022 piece, IMF economists assessed that rapid U.S. rate hikes can tighten global financial conditions and trigger capital outflows and currency depreciation in emerging markets. According to the same piece, the most exposed are countries with high public and private debt, greater foreign currency exposure and weaker external accounts.

It is not just the Fed’s decision that matters. A 2023 study published as an IMF working paper shows that U.S. economic news, such as jobs data, also affects financial conditions in emerging markets. A key channel, according to the authors, is international investors’ risk perception. Working papers express the authors’ views, not the IMF’s official position.

For you, this translates into possible effects, not guaranteed ones:

• exchange rate: tightening abroad can put pressure on the real, Brazil’s currency, which makes imports more expensive and can weigh on inflation. In its September 2026 statement, the Copom cited uncertainty about monetary policy “in some advanced economies” and a more depreciated exchange rate among the risks;
• local interest rates: yields on Brazilian bonds can rise as well, even without a change in the Selic;
• stock market and risk assets: outflows of foreign investors can push prices down. The effect varies widely across countries and periods.

What these relationships do not tell you

The channels above describe tendencies, not automatic rules. Three caveats:

• The market anticipates. An expected rate hike may have little effect on the day of the announcement, because prices already reflected it. What moves prices is surprise.
• Other factors compete. Profits, crises, wars, oil prices and fiscal policy move assets at the same time as interest rates.
• Each asset has its own risks. Bonds carry credit and duration risk, stocks can lose much of their value, and crypto assets can suffer a total loss. Interest rates help you understand the environment; they do not guarantee results.

To see how an interest rate compounds over time, see Compound interest: how it works in practice. For the role of inflation in central bank decisions, see Inflation: causes, measurement and consequences.

Key takeaways

• Interest is the price of time. When it rises, bonds already issued lose value and the present value of future profits and rents decreases.
• U.S. interest rates have a global reach because the dollar dominates international funding. On October 8, 2026, the Fed was at 3.75% to 4.00% and the ECB had a deposit rate of 2.50%, both after hikes in September.
• Emerging markets feel global tightening through the exchange rate, local interest rates and capital outflows, with an intensity that depends on each country’s fundamentals.