12-09-2006, 03:49 AM
In a nut shell
its simply demand supply cycle
higher interest rate -- lower demand -- (assume supply constant) -- prices lower
lower interest rate -- higher demand -- (assume supply constant) -- prices higher
(just consider money as a commodity)
so u may say interest rate and inflation are inversely correlated..
this is what WOrld Bank Pakistan's country manager recommended today -- he recommended to have a strong monetary policy , by increasing interest rates -- and so on....
its simply demand supply cycle
higher interest rate -- lower demand -- (assume supply constant) -- prices lower
lower interest rate -- higher demand -- (assume supply constant) -- prices higher
(just consider money as a commodity)
so u may say interest rate and inflation are inversely correlated..
this is what WOrld Bank Pakistan's country manager recommended today -- he recommended to have a strong monetary policy , by increasing interest rates -- and so on....
