Re:Analysis finds Australia’s inflation being driven by comp...
by rcme on Saturday February 25, 2023 @01:27AM
(#34934403)
> Intrest rate hikes also slow down business investment which makes supply less responsive.
That's kind of a simplification. Interest rates affect business investment. But many kinds of business investments are just "business" for other companies. E.g. when TSMC invests in building a new chip fab, they buy EUV systems from ASML. ASML uses that money to pay their suppliers and employees, etc. Also, interest rates affect real estate prices, which affects real estate development, which is a big source of employment. Government debt is also more expensive, so high interest rates also apply downward pressure on government spending.
I agree that there's too much market consolidation, and that isn't impacted much by interest rates.
That's kind of a simplification. Interest rates affect business investment. But many kinds of business investments are just "business" for other companies. E.g. when TSMC invests in building a new chip fab, they buy EUV systems from ASML. ASML uses that money to pay their suppliers and employees, etc. Also, interest rates affect real estate prices, which affects real estate development, which is a big source of employment. Government debt is also more expensive, so high interest rates also apply downward pressure on government spending.
I agree that there's too much market consolidation, and that isn't impacted much by interest rates.