From: Adam Randall
Hello
Can someone explain to me what makes interest rates rise and fall, I was under the impression that when times are good and there is alot of spending interest rates are set higher to stop the flow of money getting out of control, conversely when times look bad interest rates are dropped to encourage higher spending.
If this is the case how is an extract from a recent post to be explained ,
"Did anybody watch "Today Tonight" last night on Channel 7, Melbourne. Heading was "Property Boom, Bust". The report said that even before September 11 and the global economy slowdown, property in Sydney, Melbourne and to a lesser extent Brisbane is predicted to fall by 5 to 10% over the next 6-12 months, due to it being majorly overpriced. I'd hate to imagine what it will drop to when there is a major economic slowdown, more people lose their jobs and interest rates start to rise. BIS and Shrapnel(I think that's who they are) predicted interest rates to be at 9.5% in 2004, adding $150 per week to a $200k home loan. Time to lock in. Scary. Any thoughts on this and has anybody seen similar reports"
my thoughts would have been that if times get worse the RBA will drop rates even further, it annoys me that I think I am just starting to understand how things work, then I read something that makes me realise I do not really have a clue.
Also another question interest rates have dropped, inflation has gone up, what happens when inflation is higher than the interest rate the banks charge (can this even happen).
Regards Adam
Hello
Can someone explain to me what makes interest rates rise and fall, I was under the impression that when times are good and there is alot of spending interest rates are set higher to stop the flow of money getting out of control, conversely when times look bad interest rates are dropped to encourage higher spending.
If this is the case how is an extract from a recent post to be explained ,
"Did anybody watch "Today Tonight" last night on Channel 7, Melbourne. Heading was "Property Boom, Bust". The report said that even before September 11 and the global economy slowdown, property in Sydney, Melbourne and to a lesser extent Brisbane is predicted to fall by 5 to 10% over the next 6-12 months, due to it being majorly overpriced. I'd hate to imagine what it will drop to when there is a major economic slowdown, more people lose their jobs and interest rates start to rise. BIS and Shrapnel(I think that's who they are) predicted interest rates to be at 9.5% in 2004, adding $150 per week to a $200k home loan. Time to lock in. Scary. Any thoughts on this and has anybody seen similar reports"
my thoughts would have been that if times get worse the RBA will drop rates even further, it annoys me that I think I am just starting to understand how things work, then I read something that makes me realise I do not really have a clue.
Also another question interest rates have dropped, inflation has gone up, what happens when inflation is higher than the interest rate the banks charge (can this even happen).
Regards Adam
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