Share market correction could cause interest rate increase

Share market correction

The share market crash could have a profound effect on interest rates even though the Reserve Bank has left interest rates at 1.5%.

To some extent the RBA has lost control of interest rates as most Australian banks seek funding from overseas.So it doesnt matter what the RBA does the impact on local interest rates will be could be determined by interest rates going up overseas.This stockmarket correction was basically due to a suspected hight than normal inflation rate.If the fundamentals on interest rates are true there could be a .5% rise .Thats a extra $20,000 on a $400,000 mortgage.In America inflation is more of a sensative issue ,its a lot tougher economic enviormernt.

What we see from this correction is that borrowing cost may continue to rise ,as money is pulled out of the stockmarket and put into bonds.The correction was really needed as the stockmarket had been over heated.

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