http://www.nationalpost.com/rss/Story.html?id=253921
Summary
The Bank Of Canada is expecting to cut interest rates so that it can help ease the fears in the markets and prevent the US economy from taking Canadian stocks down following it. Bush quickly attempts to create an economic boon in US with the fiscal policy, he decreased the interest. This makes canadian economists predicts that the Bank of Canada will also lower the rates by 4% in January 2008, and by March 2008 it will be a 3.75% cut in rates. Benjamin Tal states that there is no choice, and having interest cuts are inevitable in order to balance out the economy. Market volatility has grown stronger since there are fears of global recession around. Moreover, the economy in Europe has grown a lot slower. He also stated that "credit crunch" is the number one cause for the cutting down on rates because US economy is gradually decreasing in speed of growth, there are obviously difficulties in that market. Because of this, investors can foresee that the percentage of rate cuts will increase.
Relation to the chapter
Cutting down on interest rates do relates to the chapter, because this is a factor that causes a countrie's GDP to change. Usually the economy in a country is doing bad, they can decrease interest rates, just like how the situation it's talking about in this article. The reason to this is because having the interest rates decrease, less people will want to save money in their banks, and they will be attracted to take out the money and spend more into the economy. This is one of the fiscal policies which governments follow in which the article has also mentioned.
Relfection
I personally think this is a really good way to boost the economy up, or to prevent it from going into a recession for this situation. I consider this a very good and smart strategy. In daily lives, i can also see the interest rates going up and down all the time, and i have always wondered why? What causes interests rates to go up and down? How does this affect us? After all these years, i finally got my answer. This all relates to the economy of one's country, and how it acts as a stimulant to the growth of economy.
1 comment:
I agree that cut backs on itnerest ratees help ease market fears. I think that decreasing interst rates is definately a way to spark up the economy and to balance out the economy. Decreases in interest rates changes a countries GDP. I agree that places where they are not doing well economically should try decreasing interest rates so that people will have the incentive to buy and sell more. More individuals will be attracted to borrowing money from the bank and acts as a stimulant.
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