Luthori

[Ligbruderkrieg]

Pound loses value as effects of central bank's interest rates cut felt in economy.
November 5687

The Bank of Luthori's infamous decision to cut interest rates by a whopping 2% during Prime Minister Parker-Stanford's early years in office still has repercussions on the Luthorian economy to this day, thanks to a low growth that was exacerbated by the relative lack of domestic incentive to invest in Luthori, the Pound entered a difficult period compared to many foreign cureencies, losing a non-negligeable amount of its worth, impacting its reputation among global investors.

For numerous economists, the Pound losing value compared to other currencies was to be expected, although this wasn't the line defended by the government to justify this decision. For the Parker-Stanford ministry, this was an unfortunate, but ultimately necessary endeavor, as they argue that the interest rates' dramatic cuts would mean that through them, more and more investors would be interested in investing directly in Luthori.

This didn't happen. While foreign and domestic investors were arguably interested by the risk posed by Luthori cutting its interest rates, many others were far more cautious in their operations, arguing against investments in Luthori except if that sudden change in policy was first followed by domestic investors.

It wasn't to be. As well, domestic investors were scared by the risk that direct investment was, especially if such a decision but in rising the interest rates in a dramatic level was done.

As of now, the "Global Luthorian Pound" index or GLP Index, published by the Financial Herald, take into account the value of the Luthorian Pound compared to a select numbers of global currencies, the first being the Canrillaise Fleur (CFR), even with the Canrillaise Empire's fade from global affairs, its influence and marks are still present in the Luthorian financial world, the Istalian Lira (ISL), the Narik-Darnussian Credits (NDC), the Egelian Corona (ECA) and the Yeudi Shekel (YSK). These flive currencies are considered to be the most powerful currencies currently operating.

As of today, four years following the cut, and with subsuquent decisions from the Bank of Luthori to steadily rise interest rates to combat the rise of inflation upon Luthorian households and to.combat the steady decrease in value of the Pound. While slow, the Index's value decreased by 0.94% over these four years, with its lowest point being in 5683. After that date, the index's value steadily rose again. While not really that impressive of a loss in value compared to other global currencies, the damage to the reputation of the Luthorian Pound (£) was long-lasting, with Luthorian governance and handling of the events heavily criticised by both domestic and international observers.

For the Luthorian government, the decision of cutting drastically the interest rates is now seen as a "lost opportunity" as intetest rates slowly went back up during these four years, today remaining stable at 3.25% since June 5687. The government, in order to respond to the needs of its traditional electorate for renewed economic growth and renewed consumerism, will have to find new solutions to the Luthorian economic stagnation crisis.