The war between interest rate and inflation.
Why inflation must not rise without a ceiling
If inflation is too high, central banks will prefer to subdue it. The reason is simple. High inflation continuously meant that the purchasing power of the people will reduce and subsequently, the quality of life of the people will deteriorate. For example, when food prices rise, some poor people may go hungry. This is a reality and must be handled well. Thus, the war between the inflation and interest rate is currently raging all over the world.
When inflation is under control, central banks prefer pro-growth interest rates
Higher growth means businesses will need to expand their business. More expansion equals to more jobs. More jobs meanwhile means a higher demand for goods and services. This meant that businesses must expand more and the cycle of economic expansion, job and demand will continue to happen. This is encouraged as long as demand does not turn into inflation due to too many demand chasing too few goods; inflation as per economics 101. I think it’s starting to show that inflation is a worry all around the world today.
European Central Bank’s war against inflation
News in cnbc.com: European Central Bank member says to expect first rate hikes this summer European Central Bank may increase rates for the very first time after more than a decade. Joachim Nagel gave comments to CNBC which indicated that the first interest rate rise could come in July. This is not just Europe.
Fed will ‘fight’ against inflation until it wins
News in cnbc.com. Powell says the Fed will not hesitate to keep raising rates until inflation comes down. Meanwhile the US Federal Reserve says that it willcontinue to raise rates untilinflation comes down. A war against inflation which Fed wants to win.
Even 6th largest economy is thinking of rates increase
Plus all these countries which had increased its rates. Earlier article for reading here: India, the world’s top 10 largest economy is seriously considering a major rate hike as well. (6th largest to be exact)
Prices, once risen will find it hard to come down
I just realised that my favourite dry curry noodle which used to be RM6 has just become RM7 yesterday evening. Reason? Cost of materials went up. Sometimes it’s tough to argue when the food is just too delicious, right? Hopefully, there are more choices so that I do not have to be stuck with just one choice and having to continue paying ever higher for the same bowl of noodle.
More interest rate stories
Here are all the other countries which had increased their interest rates. In fact, Malaysia is included too which was a surprise because many analysts expected Bank Negara to wait a little more before increasing the rates. I think the pressure from all the countries are just too high. Article here: Starting to worry with a higher interest rate?
Happy understanding and getting to know what’s happening
Property News Malaysia? Sign up for daily investment news updates (FREE since Nov 2013 and FOREVER). Alternatively, Follow me on Telegram here.
Please LIKE kopiandproperty.my FB page to get daily updates about the property market beyond kopiandproperty.my articles. Else, follow me on Twitter here.
Next suggested article: True cost of a property is not when we are young
Leave a Reply