Economy recovers the market starts to be overheated. Countries to increase the interest rate to cool down the overheated market, for instance, Brazil and New Zealand.
Due to overheated market growth from high domestic demand, Brazil gov decides to increase 75 basis points to 10.25%. This method is tightening currency policy.
Central bank of NZ increases interest rate from 2.5% to 2.75%. The bank explains that its country has been recovering from economy crisis and it enters second year of recovery. The bank maintained low interest rate of 2.50% since last year of April. It is to resist the impact from global economy crisis.
From these two countries, this is the sign of economy recovery.
Why is market overheated when economy is recovering? In my opinion, many countries are printing more and more their notes in these years. During economy crisis, huge amount of capital was withdrawn from stock markets. Many countries also reduce the interest rates to encourage market capital liquidation. Many investors were finding chances to 'park' their money in place with higher return. Loan rate is also low. So the effect makes property hot. Huge amount of money is also in the market. This definitely will heat the market even this boosts the economy.
No choice, but governments need to cools the overheated market to resist inflation.
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