Another Interest Rate Increase?

[hrhpablo]

Just curious if anyone out there is prepared to punt on whether or not we are going to get slugged with another 0.25%?! I was reading an infochoice article (refer below) about this and some other articles I've read also seem to indicate there's a strong chance it will happen...

"1 Apr 2005 - April rate rise hangs in the balance
InfoChoice

The Reserve Bank meets again on Tuesday to consider interest rates with a decision over whether to opt for another rise or hold rates steady hanging in the balance.

When looking at the latest employment, housing and borrowing figures, the case for a further quarter-point rate rise is still there. Jobs growth is still seemingly going from strength to strength with private sector job vacancies climbing 6 per cent in the three months to February. But it would be interesting to know whether that growth rate was that strong over the final month of that period to determine whether the jobs market is still as strong right now as it was at the end of 2004.

Housing approvals fell 0.5 per cent seasonally adjusted in February while approvals for private sector houses dropped 3.4 per cent. Overall, the rate of housing construction appears to be steadying after falling for a year or more. The RBA's housing credit numbers showed a 1 per cent increase in February with borrowing for housing also levelling out over the last six months at these still-healthy levels historically.

Personal credit growth was 1.1 per cent and still at an annual rate above 15 per cent. Whether the RBA feels the borrowing binge is fully reined in to sustainable levels or not will factor in its rate decision. One suspects that it might not be entirely comfortable with borrowing at these levels, indicating that it hasn't quite got the credit genie back in the bottle.

But set this against falling economic growth over the whole economy and the rising oil price and the doubts about the wisdom of lifting rates again right now begin to creep in. Add to that the reaction to the March rate rise which, although it can't be properly measured yet, seems to have had a big impact in the minds of consumers and the Reserve Bank might just feel it's done what it needs to for the moment."

 

[HeirConditioner]

I would wager whatever I could afford on there being an interest rate rise sometime in the next two quarters, and most of that on the rise occuring in the next quarter.

Inflation is a serious concern for the government. Although the Reserve bank doesn't want to hinder any growth, their decision will be determined more by the creeping inflation.

For modern economists, inflation is the biggest of all the nasties. This situation of slowing growth and rising prices is sometimes called stagflation (although no one would call our situation stagflation yet - it's not too bad).

http:/en.wikipedia.org/wiki/Stagflation

Remember, as Peter Costello will remind you whenever possible, that interest rates are still at 'historically low levels'.

If anyone wants to make a bet... actually, betting against 'virtual' internet people isn't such a great idea, is it?

 

[ralph wiggum]

Just curious if anyone out there is prepared to punt on whether or not we are going to get slugged with another 0.25%[/I]

What odds are you offering?

 

[hrhpablo]

I think we're all betting on the same side of the equation, somehow. I'm not looking forward to even another 0.25%, I have to say...

 

[Aceyducey]

HeirCondition - are you sure you've got the definition of Stagflation quite right?

It generally refers to a period of high inflation and high unemployment simultaneously (as the wikipedia says, in agreement with my economic textbooks from too long ago).

Currently Australia is experiencing falling to stable unemployment coupled with stable to slightly rising inflation rates.

That's not how you make porridge! er stagflation!

If interest rate rises 'hang in the balance' that implies a 50% chance of no rise.

The inflation rate was 2.6% at December, being 0.1% over the average rate the RBA is trying to achieve.

Personally I reckon it will be steady as she goes while the effects of the last rise are digested.


Cheers,

Aceyducey

 

[superted]

Another rate rise should be announced Wednesday giving the masses something else to "digest"


Has to be now not later because of the timing of the budget in May.

 

[pete152]

Well I will bet no rise this time.
Peter ( I hope)

 

[quoll]

I'm betting on ........... no rise.

my 2c

ha ha cheap bet
quoll

 

[Merovingian]

I'm also hedging towards no rate changes this month.

Just my opinion...

 

[hrhpablo]

Merovingian, quoll and pete152 - I really hope you're right. That and the abolition of the NSW land tax changes would make my year

 

[XBenX]

Im up for the removal of land tax - but I love unemployment and interest rates at 10% and a few periods of negative growth

Im too young to remember the last recession - Id like to learn some lessons first hand...

 

[HeirConditioner]

Aceyducey:
are you sure you've got the definition of Stagflation quite right?

Stagflation is a term in macroeconomics used to describe a period of characteristic high inflation combined with economic stagnation, unemployment, or economic recession.

Economic stagnation, unemployment or recession - and I said 'slowing growth'. Yeah, I'd say that I had the definition right.

But, like I also said, this isn't stagflation. That's still a year or so away! But seriously, where's our growth going to come from? And the oil prices are just going to continue increasing.

I might move to France.

 

[Les]

I'd like to see the RBA "hold" for another month or two. But then, I'm used to being ignored by the RBA. So, I should probably bet on the side of "another 0.25% slug".

But why? Well don't ask me.... I can't see the need. Perhaps another 0.25% in the next quarter, and perhaps a further hit by year end (depending on world events) but now? Nah - can't see it

But I'm not backing me - lost too many times before. So, if another 0.25% happens, I won't be overly surprised (or hurt),

Regards,

 

[XBenX]

But, like I also said, this isn't stagflation. That's still a year or so away!

I love the fact how people are so definative about economics...

My favourite quote regarding economics is along the lines of:

"Economists are the only people who can definatively explain why their predictions from yesterday didnt come true today."

But still, your comment may very well turn out to be true.

Me, Im an optimist - Id like to think the governor who has lead us successfully for what is almost the max allowable term as governor through the Asian financial crisis and many other unstable periods with a deft touch will continue to do so...

But hey, we cant go on ignoring the economic cycle forever...

 

[crest133]

Hi All
I'm so relieved there was no interest rate rise. I feel it would have been very damaging to the average household, family, battling mortgage paying lunchbox Joe 'n Joyce, not to mention the investors who are stretched and trying to avoid increasing rents on their properties.

It sure wouldn't help me or my fellow motel operators with motel mortgages, most of us are already paying around 7.5%, and many other business owners would be considering price increases. Regional Tourism - as in western NSW, is suffering from high fuel prices, cheap overseas competition, intense advertising of alternatives (from the likes of NRMA & Harvey World Travel who are keen to export our precious hard-earned tourist dollars,) tourist drought-shyness, and an increase in accommodation tariffs always affects occupancy, duration, itinerary and of course final level of expenditure.

Don't need a rate increase right now.
The general consensus from the bush in my area is that the Govt is not worth feeding and the very mention of Bob Carr spoils a good beer.
Need the Govt to be more in touch with real people.
Need Aussies holidaying at home.
Hope you all benefited from the decision to leave interest rates static, I sure did.
cheers
crest133