Glenn Stevens to gun down inflation

Glenn Stevens to gun down inflation

INTEREST rates are unlikely to fall despite the volatility engulfing global markets, Reserve Bank governor Glenn Stevens has signalled.

Delivering a blow to debt-laden households and struggling retailers, Mr Stevens yesterday indicated that Australia's central bankers would not budge from their hawk-like position on the threat of inflation.

Mr Stevens said that if it were not for the strength of the Australian dollar, which climbed half a cent against the greenback to US104.84c after he spoke, inflation would be a greater threat.

HSBC chief economist Paul Bloxham said Mr Stevens' comments signalled that inflation remained the Reserve Bank's primary concern.
 
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RBA's hawk like position......yeah right...last rise was almost 1 year ago....:rolleyes:



Mr Stevens said that if it were not for the strength of the Australian dollar, which climbed half a cent against the greenback to US104.84c after he spoke, inflation would be a greater threat.

Yes and the A$ is doing a fine job of it...!

Mr Stevens is toting a pop gun without a cork....
 
Mmmm. Unlikely to fall.
"no chance at all" was the RBA,s position a few months back. How quickly things change.
Don't go tooting your horn to quickly there Nostradamus .
 
In all it's lifetime the RBA has never done anything to curb inflation or to help interest payers.
Glenn Stevens is just highlighting that at the next chance it gets the RBA is going to once again screw all Australians who borrowed money.
Just as it has been doing since it's inception.
 
Slightly different opinion from me. I think the RBA believes that rates are at about the correct level for now, and wants Australia to 'ride out' volatility as much as possible, saving potential drops for if things get really bad. They made quite a few changes over the past 4 years, and some of that may not have washed through the system yet.

I also maintain that there will be desire by the RBA to not fall into the trap of letting interest rates trend lower and lower like the US did. I expect today's rates to still be a bit on the low side of the very long term expected average.
 
Part of the RBA's job to curb inflation is to put the willy's up the populace with threats that they "may" raise interest rates.

The threat is often usually enough to dampen spending further. It just tactics that they have always employed.
 
The curious thing is that you are all probably equally correct on this at exactly the same time.

The RBA is definitely hawkish on inflation, but also knows that higher interest rates right now could well lead to massively increasing business failure and consequently rising unemployment.

The RBA charter is to look toward both, you'll remember (and, consequently, it is not a task I envy them one bit).

Anybody remember stagflation? Not a nice thought, but it must be at the forefront of the RBA's collective mind right now, I imagine.

I know that I'd love to see interest rates fall, but I fear even more what the RBA will be forced to do if inflation does take hold. Today's 'tight' bias (i.e. 'seemingly' high interest rates) would look like mere child's play then. "A recession we had to have" again really does not appeal to me.

One thing I think we can all agree on is that we never, ever want to go back to experiencing double digit interest rate figures. Imagine the pain!

So, to my mind, if the RBA wants to play it safe, then that's just fine and dandy by me as an investor. (My business manager's brain is doing cartwheels at the same time though, as the thought of a continuingly depressed non-mining sector economy really does worry me - and seemingly, every other business and consumer.)

Personally, I'll be laughing if interest rates go down, but also worrying like hell that inflation will break out at the same time.

Better safe then than seriously sorry?

Afterthought: It really is curious to me that we all today individually have so many conflicting agendas (as consumers/producers, employees/employers, spenders/savers, etc) that we continue to debate along almost archaic traditional left-right political lines. Is that class-ideological nonsense really still so relevant these days as to continue to demand our completely unthinking loyalty? I'm wondering more and more about this.
 
The threat is often usually enough to dampen spending further. It just tactics that they have always employed.

Are you suggesting that the RBA, at the time being anyway, is discouraging spending and encouraging saving?

From my limited economics knowledge including watching docos, does the RBA want to control spending. So they look at economic conditions here and overseas and say where or not it's ok to spend. Is this the case and would there be an advantage in identifying when this will happen?
 
When the RBA was raising interest rates, they didnt have to go as high as they might have done, because the banks raised their interest by significantly more than the RBA did.

I suspect we will see a similar thing in reverse. the banks are needing to write new loans, so they are lowering their interest rates (as some have already done on professional packages) without the RBA lowering the official interest rate.
 
I think the RBA's task is hard because they are too subversive and oafishly Keynesian to admit interest rate rises don't control inflation.

Consider the main components that increased last quarter's cpi :

- food up 1.4% due primarily to a cyclone's effect on bananas which went up 377% in the last 6 mths. Vegetables en masse went down 10.8%, and milk by a similar amount over the last 12 mths. but none of this was enough to offset banana prices.

OK, the RBA thinks we should pay more interest because a cyclone knocked out a banana crop. Yeah, economic genius.


- transportation costs were also a major contributor via fuel and public transport fee rises.

OK so fuel goes up in price (the RBA doesn't understand why) and they want us to pay more interest and catch the bus. But hang on, public transport also went up. :rolleyes:

- clothing and footwear went up primarily because jewelry went up, driven by the rising price of gold.

OK, we have to pay more interest because gold goes up because the USD went down. ummm?

- The main contributor to the increase in the financial and insurance services group in the June quarter 2011 was deposit and loan facilities (+2.1%), which include both direct fees and prices derived from interest rate margins.

OK, the RBA and banks put rates up, which attracts higher rate related fees....so the RBA wants to put rates up again, creating a positive feedback loop.

All this while the unemployment rate trends up.

Good luck to all that buy into this.
 
I think the RBA's task is hard because they are too subversive and oafishly Keynesian to admit interest rate rises don't control inflation.

Yeah those dimwits clearly should hire you to run monetary policy. There's actually a large literature on how central banks have less impact then they used to due to globalisation etc. I'm sure the RBA boffins are well aware of it. After all they talk about it with regards to the banks hiking more than the equivalent RBA rise.
 
OK, the RBA and banks put rates up, which attracts higher rate related fees....so the RBA wants to put rates up again, creating a positive feedback loop.

All this while the unemployment rate trends up.

Good luck to all that buy into this.
Just have to ask,what is a positive feedback loop,i still think the rates can only go one way,and that's up,and if one thinks different with all the personal savings on the rise most Banks would not need the funding from OS,as they will be able to bounce along with 20% less high paid staff..
 
The RBA has been pretty explicit that it's quite happy to see retail and the property industry contract to make way for mining. If you are a real estate agent or work in retail things aren't going to get better any time soon:





RESERVE Bank boss Glenn Stevens has issued a chilling warning to workers: job losses are not only a sign of the times, but a signal of worse still to come.

Reeling from a massive unemployment carve up in the manufacturing industry, the RBA governor gave cold comfort to families whose loved ones are now out of work, declaring: "I'm sorry, but that is just the reality."

BlueScope Steel devastated more than 1000 workers when it announced a restructure after posting losses of more than $1 billion. The news followed similar announcements by Qantas, OneSteel and Westpac, and brought the official number of job losses for the month to 9000, although the true figure is likely to be higher.

Mr Stevens warned the global economy had significantly worsened in recent months and that restructuring in various sectors couldn't be helped.

"Some parts of the economy will shrink while others grow. I wish I could say we had a way of avoiding that; I don't think we do . . . We don't have an instrument that can prevent these shifts in the structure of the economy from occurring. I'm sorry but that is just the reality," he said.

Read more: http://www.news.com.au/business/bus...ts/story-e6frfm9r-1226123687766#ixzz1WJIvx0So
 
Just have to ask,what is a positive feedback loop,i still think the rates can only go one way,and that's up,and if one thinks different with all the personal savings on the rise most Banks would not need the funding from OS,as they will be able to bounce along with 20% less high paid staff..

when the RBA put up the cash rate -> banks follow -> their rate related fee revenue goes up -> which contributes to a rise in CPI -> which is grounds for the RBA to raise the cash rates, again.

yeah the household saving rate is an interesting thing. it is back to 11%, last seen in the late 80s, when fewer households relied on two incomes and there wasn't compulsory superannuation. To my knowledge the banks no longer attract wads of household savings, apart from via managed super funds.
 
I think the RBA's task is hard because they are too subversive and oafishly Keynesian to admit interest rate rises don't control inflation.

I agree that the RBA's task is hard.

I'm not saying I agree (or disagree) with the rest of that statement.

But in defence of the RBA it often seems they left to fight the inflation bogeyman all by themselves. Sure that's their role, but they only have one instrument at their disposal (the OCR) and since 1993 they've been bound to the policy targets agreement (inflation at 2-3% over the business cycle).

What frustrates me is that I can think of numerous other policies (controlled by the Government, not the RBA) that can also impact on the inflation rate and which aren't as blunt as thwacking the entire economy with higher interest rates.
 
when the RBA put up the cash rate -> banks follow -> their rate related fee revenue goes up -> which contributes to a rise in CPI -> which is grounds for the RBA to raise the cash rates, again.

yeah the household saving rate is an interesting thing. it is back to 11%, last seen in the late 80s, when fewer households relied on two incomes and there wasn't compulsory superannuation.
Yes it is,so in very simple terms people have started to save again i just look at all this from a different angle,it will make no difference if the rates go up or down what happens in-between is what matters..
 
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