CharlotteMaria
17-07-2004, 20:00
IN THIS MONTH'S MONETARY POLICY REVIEW, CHARLOTTEMARIA'S NATIONAL RESERVE BANK RAISED ITS BASE RATE FROM 13.75% to 15%, IN AN ATTEMPT TO CONTROL SPIRALING INFLATION
INCREASE IN THE COST OF BORROWING MONEY
With the credit boom in the last few years, consumers have been borrowing more money on thier credit cards to spend on goods and services. This month's increase in interest rates will mean that it will become more expensive to borrow money to spend on goods and services. This means that consumers will have to alter thier spending habits this month.
INCREASE IN THE COST OF CONSUMER DEPT
During the credit boom, many consumers got into dept due to borrowing more money on thier credit cards than they earned in income. The increase in interest rates will mean that the amount of money they owe on the dept will increase, meaning that they will be in serious financial trouble if they do not reduce their spending now.
INCREASE IN THE COST OF MORTGAGES
In CharlotteMaria, there has been a housing boom in the last few years. Many people have been taking out mortgages in order to purchase new homes. Due to the increase in interest rates, the amount of money people will have to pay on thier mortgages each month will increase. These people will be left with less disposable income to spend on goods and services.
HOME REPOSSESSIONS
Many of those with large outanding mortgages will not be able to pay the monthly cost of the mortgages. This means that the goverment could reposses these people's homes so they they would be left on the streets with no home.
NEGATIVE EQUITY
In due course, the increase in the cost of taking out mortgages to buy new homes could put many people off buying homes, reducing the demand for homes. This means that the values of these properties could drop, so that they would be worth less than a mortgage that was taken out on it when it was more expensive. Many people's morgages could soon be more expensive than the value of thier properties.
STATISTICS FOR LAST 2 YEARS
NOMINAL INTEREST RATE (NATIONAL BANK BASE RATE)
24 months ago - 7.25%
23 months ago - 7.00%
22 months ago - 6.75%
21 months ago - 5.75%
20 months ago - 5.75%
19 months ago - 5.75%
18 months ago - 5.75%
17 months ago - 5.75%
16 months ago - 5.75%
15 months ago - 5.75%
14 months ago - 5.75%
13 months ago - 5.75%
12 months ago - 5.75%
11 months ago - 6.25%
10 months ago - 6.75%
9 months ago - 7.25%
8 months ago - 7.75%
7 months ago - 8.25%
6 months ago - 8.75%
5 months ago - 9.25%
4 months ago - 9.75%
3 months ago - 11.00%
2 months ago - 12.50%
1 month ago - 13.75%
now - 15.00%
RPIX INFLATION
24 months ago - 5.8653%
23 months ago - 5.3242%
22 months ago - 4.6542%
21 months ago - 4.2142%
20 months ago - 3.8752%
19 months ago - 3.6297%
18 months ago - 3.4014%
17 months ago - 3.5908%
16 months ago - 3.9235%
15 months ago - 4.4320%
14 months ago - 4.8183%
13 months ago - 5.4092%
12 months ago - 6.0243%
11 months ago - 6.7123%
10 months ago - 7.3214%
9 months ago - 8.1039%
8 months ago - 8.5874%
7 months ago - 8.8042%
6 months ago - 9.2247%
5 months ago - 9.7230%
4 months ago - 9.8893%
3 months ago - 10.1870%
2 months ago - 10.0046%
1 month ago - 9.9342%
now - 9.7890%
REAL INTEREST RATE
24 months ago - 1.3847%
23 months ago - 1.6758%
22 months ago - 2.0958%
21 months ago - 1.5358%
20 months ago - 1.8748%
19 months ago - 2.1203%
18 months ago - 2.3486%
17 months ago - 2.1592%
16 months ago - 1.8265%
15 months ago - 1.3180%
14 months ago - 0.9317%
13 months ago - 0.3408%
12 months ago - -0.2743%
11 months ago - -0.4623%
10 months ago - -0.5714%
9 months ago - -0.8539%
8 months ago - -1.0542%
7 months ago - -0.5542%
6 months ago - -0.4747%
5 months ago - -0.4730%
4 months ago - -0.1393%
3 months ago - 0.8130%
2 months ago - 2.4954%
1 month ago - 3.8158%
now - 5.2110%
UNSUSTAINABLE BOOM
During the last 2 years, the goverment applied a policy of lowering the interest rate to 5.75% to encourage more spending to stimulate the economy. Although it brought real GDP growth to a peak of 4.4703%, inflation soon started to rise. The government then had to start raising interest rates again to control this inflation.
RECESSION LOOMING
The high interest rates could deter consumer spending, and so reduce demand for goods and services. This means that firms producing the goods and services would have to reduce output, and so lay off workers. This will lead to an increase in unemployment.
INCREASE IN THE COST OF BORROWING MONEY
With the credit boom in the last few years, consumers have been borrowing more money on thier credit cards to spend on goods and services. This month's increase in interest rates will mean that it will become more expensive to borrow money to spend on goods and services. This means that consumers will have to alter thier spending habits this month.
INCREASE IN THE COST OF CONSUMER DEPT
During the credit boom, many consumers got into dept due to borrowing more money on thier credit cards than they earned in income. The increase in interest rates will mean that the amount of money they owe on the dept will increase, meaning that they will be in serious financial trouble if they do not reduce their spending now.
INCREASE IN THE COST OF MORTGAGES
In CharlotteMaria, there has been a housing boom in the last few years. Many people have been taking out mortgages in order to purchase new homes. Due to the increase in interest rates, the amount of money people will have to pay on thier mortgages each month will increase. These people will be left with less disposable income to spend on goods and services.
HOME REPOSSESSIONS
Many of those with large outanding mortgages will not be able to pay the monthly cost of the mortgages. This means that the goverment could reposses these people's homes so they they would be left on the streets with no home.
NEGATIVE EQUITY
In due course, the increase in the cost of taking out mortgages to buy new homes could put many people off buying homes, reducing the demand for homes. This means that the values of these properties could drop, so that they would be worth less than a mortgage that was taken out on it when it was more expensive. Many people's morgages could soon be more expensive than the value of thier properties.
STATISTICS FOR LAST 2 YEARS
NOMINAL INTEREST RATE (NATIONAL BANK BASE RATE)
24 months ago - 7.25%
23 months ago - 7.00%
22 months ago - 6.75%
21 months ago - 5.75%
20 months ago - 5.75%
19 months ago - 5.75%
18 months ago - 5.75%
17 months ago - 5.75%
16 months ago - 5.75%
15 months ago - 5.75%
14 months ago - 5.75%
13 months ago - 5.75%
12 months ago - 5.75%
11 months ago - 6.25%
10 months ago - 6.75%
9 months ago - 7.25%
8 months ago - 7.75%
7 months ago - 8.25%
6 months ago - 8.75%
5 months ago - 9.25%
4 months ago - 9.75%
3 months ago - 11.00%
2 months ago - 12.50%
1 month ago - 13.75%
now - 15.00%
RPIX INFLATION
24 months ago - 5.8653%
23 months ago - 5.3242%
22 months ago - 4.6542%
21 months ago - 4.2142%
20 months ago - 3.8752%
19 months ago - 3.6297%
18 months ago - 3.4014%
17 months ago - 3.5908%
16 months ago - 3.9235%
15 months ago - 4.4320%
14 months ago - 4.8183%
13 months ago - 5.4092%
12 months ago - 6.0243%
11 months ago - 6.7123%
10 months ago - 7.3214%
9 months ago - 8.1039%
8 months ago - 8.5874%
7 months ago - 8.8042%
6 months ago - 9.2247%
5 months ago - 9.7230%
4 months ago - 9.8893%
3 months ago - 10.1870%
2 months ago - 10.0046%
1 month ago - 9.9342%
now - 9.7890%
REAL INTEREST RATE
24 months ago - 1.3847%
23 months ago - 1.6758%
22 months ago - 2.0958%
21 months ago - 1.5358%
20 months ago - 1.8748%
19 months ago - 2.1203%
18 months ago - 2.3486%
17 months ago - 2.1592%
16 months ago - 1.8265%
15 months ago - 1.3180%
14 months ago - 0.9317%
13 months ago - 0.3408%
12 months ago - -0.2743%
11 months ago - -0.4623%
10 months ago - -0.5714%
9 months ago - -0.8539%
8 months ago - -1.0542%
7 months ago - -0.5542%
6 months ago - -0.4747%
5 months ago - -0.4730%
4 months ago - -0.1393%
3 months ago - 0.8130%
2 months ago - 2.4954%
1 month ago - 3.8158%
now - 5.2110%
UNSUSTAINABLE BOOM
During the last 2 years, the goverment applied a policy of lowering the interest rate to 5.75% to encourage more spending to stimulate the economy. Although it brought real GDP growth to a peak of 4.4703%, inflation soon started to rise. The government then had to start raising interest rates again to control this inflation.
RECESSION LOOMING
The high interest rates could deter consumer spending, and so reduce demand for goods and services. This means that firms producing the goods and services would have to reduce output, and so lay off workers. This will lead to an increase in unemployment.