Cash rate of 5 per cent this time next year

[boomtown]

Michael

I read GS's statement as more aggressive than the one you postulated. I read the words:

Nonetheless, with demand slowing, the Board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing.

as conditioning the market for a drop. Its taking the view that current monetary policy is already having a tightening effect rather than just stating rates will drop if current monetary policy has a tightening effect. I read that as a subtle shift of emphasis which is particularly noteworthy given the bloodbath we had for the June CPI.

 

[Ajax]

So what's the name of the company? +2

 

[boomtown]

My apologies guys not able to say more - let's consider it a cautionary tale and leave it at that. I'm sure it happpens all the time.

 

[Shadow]

I read GS's statement as more aggressive than the one you postulated. I read the words:

Nonetheless, with demand slowing, the Board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing.

as conditioning the market for a drop.

I agree, I think they are conditioning the market for a drop, and soon. I also expect that the RBA does communicate with the major banks, and will have a reasonably good idea whether or not the banks will follow.

When the RBA cuts rates, then they will be doing this because they want to ease pressure. But that won't happen if the banks don't follow.

So if, during conversation with the RBA, the banks say 'we'll only pass on half of your next cut', and the RBA wants consumers to get the full 25 basis point reduction, then we can expect the RBA to double the size of their cut to 50 basis points.

The banks source about 50% of their funding from overseas, so we can't really expect them to pass on the full rate cut.

The market is pricing in a 100% chance of a cut NEXT MONTH. Or 200% for October (i.e. 50 basis points by October). The market currently expects interest rates to be down 125 basis points this time next year. See chart below...

http://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf


Shadow.

 

[buzzlightyear]

The market is pricing in a 100% chance of a cut NEXT MONTH. Or 200% for October

A more than a 100% chance of a rate reduction in October. Like those odds Head-em up spinner

 

[MichaelW]

The market is pricing in a 100% chance of a cut NEXT MONTH. Or 200% for October (i.e. 50 basis points by October). The market currently expects interest rates to be down 125 basis points this time next year. See chart below...

Hi Shadow,

I read that as factoring in a 95bp cut over the next 12 months. i.e. A cash rate of 6.30% in August 09 vs 7.25% today.

Cheers,
Michael

 

[RumpledElf]

A lot of people have asked me if I'm getting rid of my V8 with fuel costs the way they are, but I have come to the conclusion that it's more expensive to buy another car, rather than just keep the one I've got!

hehe ... I have a little car with a little fuel bill ($80 a tank, used to be under $50) but its starting to show signs of age (the poor thing is almost 8 years old and very well used) so I'm actually having to pay attention to it because I want it to last another 8 years!

New car will cost more than keeping mine happy for a few years yet. Cars are expensive. I want to build my house in the next town so I can just WALK to the supermarket dammit

 

[Mike F]

When the RBA cuts rates, then they will be doing this because they want to ease pressure. But that won't happen if the banks don't follow.

K Rudd could always set up a 'Bank Watch' website! That would solve everything!

 

[willair]

The banks source about 50% of their funding from overseas, so we can't really expect them to pass on the full rate cut.

Shadow,i would not just get your hopes up yet,maybe Mr Rudd and his sidekick The BLACK Swann think that will happen,the same as they thought they could control the price of petrol-food i still think the rates will stay at these levels , and i also think the government want these high levels of interest rates till one year prior to the next election..imho..

 

[Francesco]

Michael

I read GS's statement as more aggressive than the one you postulated. I read the words:

Nonetheless, with demand slowing, the Board's view is that scope to move towards a less restrictive stance of monetary policy in the period ahead is increasing.

as conditioning the market for a drop. Its taking the view that current monetary policy is already having a tightening effect rather than just stating rates will drop if current monetary policy has a tightening effect. I read that as a subtle shift of emphasis which is particularly noteworthy given the bloodbath we had for the June CPI.

I think at least a rate cut this year is a certainty. The early the better, ie Septermber for the RBA to then 'sit back' and observe whether more action is required in October. If they missed stimulating the retail sector over Christmas they will need drastic resuscitation next year. The retail sector probably has shown the Govt that Christmas in July sales have stirred up little consumption growth from the public. I don't think the govt rep in the RBA will want to wear that happening a second time.

Now if petrol will do its part to tighten purse strings and stay over $100 a barrel for the rest of the year! Like most on the forum I would welcome an IR drop, it will lower the urgency to maintain high asking rent.

 

[tropic]

At least with RBA they have plenty of room to drop the rate if they need to.
Some other countires might not have that "luxury".
The only thing that I am wondering with what happened in the last 2 days with the Aussie dollar. This has something to do with lower commodity prices and market expectation that RBA will drop the IR.
If the our dollar weaken, our inflation will go up since we practically import everything from China etc.
RBA then has to contain inflation and keep the IR high?

 

[BayView]

A lot of people have asked me if I'm getting rid of my V8 with fuel costs the way they are, but I have come to the conclusion that it's more expensive to buy another car, rather than just keep the one I've got!

How do you figure that?

Solution:

1. sell V8 to first realistic buyer for cash.
2. use cash from V8 to buy el-cheapo 3 year old dime-a-dozen Hyundai excel/accent for half the cost of the V8.
3. use excess funds from sale to pay for next year's rego and third party insurance.
4. fill tank once per week for $55, as opposed to V8 tank twice per week for $150+ (for commuters).
5. service Hyundai once per year for $250. Other running costs are embarassingly low.

Don't laugh - this is what the Hyundai Accent we own costs to run. Ours is actually 7 years old.

I keep thinking it's time for a sec/hand beemer or something like that, but my investor brain sees an IP deposit instead of a car.

 

[Rockstar]

Don't laugh - this is what the Hyundai Accent we own costs to run. Ours is actually 7 years old.

Mate I regret selling our old Hyundai Sprint. It was a ripper and ran on the smell of an oily rag. I have a corolla 1.6l now and it's a guzzler compared to the Sprint.