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Explain it to me like I'm 5, page-8

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MTX2000

1,994 Posts.

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18/07/21

18:50

Post #: 54586572
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Originally posted by Infose: ↑

"If inflation starts to increase what levers do the government have left to pull to keep it under control?"

Government has at its disposal two types of levers, namely fiscal and monetary.

Fiscal: It can increase taxes and cut down on discretionary spending or do both.

Monetary: It can increase interest rates to the point of creating a recession (a central bank induced recession), It can also increase capital and reserve requirements of the banks or force an increase in the amount to be deposited for property loans, or the selling of assets (gov bonds) by the central bank in order to mop up excess liquidity. And, of course, a mixture of all of the above.

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All of these would seem to be likely to put downward pressure on property prices.
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