August 28, 2007
Mortgage rates to increase with inflation?
According to a report by Marketwire, the continue rise in food prices worldwide, caused by extreme weather reducing harvests, is likely to cause an increase in inflation - which in turn will force central banks around the world to put up interest rates.
According to the report, harvests in major food production countries such as the USA, Canada, Australia, Europe, and across Asia, output is expected to fall by as much as 20% in some areas.
Grain is especially affected, but so are common vegetables.
The expectation is that these price rises on basic foodstuffs will additionally cause diary and meat product prices to rise.
As food prices are a basic measure of the CPI - Consumer Price Index - any significant rise in food prices will cause an increase in inflation.
And any increase in inflation will pressure banks to raise interest rates.
Source [Marketwire]
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