Normal
A couple of points I have difficulty getting my head around.Seems like everything I buy (school fees, petrol, energy, food, council rates..... etc) have been rising faster than the official CPI for years, not just recently. So in my mind the official CPI doesn't accurately reflect the real inflation rate anyway.Talk of inflation eroding debt.I was taught that the nominal interest rate charged on debt equals the real interest rate (cash rate) plus inflation. So while the principle is eroded by inflation, the compounding interest paid on that principle should at least rise by inflation rate plus some.Seems that interest charged by banks for debts such as mortgage are currently well below cash rate plus inflation. Must be a lot of interest rate catchup in the future.Maybe I'm wrong.
A couple of points I have difficulty getting my head around.
Seems like everything I buy (school fees, petrol, energy, food, council rates..... etc) have been rising faster than the official CPI for years, not just recently. So in my mind the official CPI doesn't accurately reflect the real inflation rate anyway.
Talk of inflation eroding debt.
I was taught that the nominal interest rate charged on debt equals the real interest rate (cash rate) plus inflation. So while the principle is eroded by inflation, the compounding interest paid on that principle should at least rise by inflation rate plus some.
Seems that interest charged by banks for debts such as mortgage are currently well below cash rate plus inflation. Must be a lot of interest rate catchup in the future.
Maybe I'm wrong.
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