Interest rates: what is the April news?

[quiggles]

We've argued the principles and debated the issues, but it's time to put your money where your mouth is. Next month is the RBA going to let rates decline, leave them alone or raise them by .25% or .5%?

Any other scenario I would regard as science fiction.

I have argued since last December that we would see interest rate rise in the first quarter of the year and since January (I think) that we would see two consecutive 0.25% rises. None of the data have changed my opinion, so you know which way I'm voting.

Come, illuminati! Enlighten us.

 

[Aceyducey]

Quiggles,

There is no such organisation as the illuminati.

Trust me



Cheers,

Aceyducey

PS: Submarines, heavier-than-air flying machines, robots, spaceships, mobile phones and computers are all some of the everyday things we take for granted that were all science-fiction a little over 100 years ago......

 

[keithj]

I read at the end of last week that the bond market had factored in a 55-60% chance of a 0.25% rise, so the current SS vote of 52% for a rise correlates pretty well to that.

 

[quiggles]

Well, the Somers Optimists Fofum Trustees (SOMERSOFT, for short) are casting their votes and possibly pinning their votes to their hopes as well. I'd be quite happy to be wrong...

 

[Bill.L]

Hi all,

I voted unchanged.
Based on lower growth, but especially the rising oil price. The RB mentioned the higher oil price as a brake on the economy a while ago, as higher petrol prices suck cash out of other things.

bye

 

[Peter 14.7]

What a difference ONE word makes

For those who follow the US like me note this from the AFR tiday, Peter 147

Inflation warning as Fed lifts rates
Mar 23 08:03
AFP

US Federal Reserve policy makers announced overnight a widely expected quarter-point hike in US interest rates, while unsettling financial markets with an aggressive warning on inflation.

The Federal Open Market Committee surprised no one by lifting the benchmark federal funds rate by 25 basis points for the seventh time in as many meetings to 2.75 per cent.

But the FOMC's heightened warning about inflation packed a punch that caught investors off guard.

In its statement at the conclusion of its policymaking meeting, the central bank kept its use of the term "measured" - a word closely watched by financial markets - to describe its probable future course of action.

"With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured," the FOMC said in its statement.

Analysts had predicted that if it retained the term "measured" to describe its monetary policy stance, the Fed would signal that it did not intend to go beyond a quarter-point raise in upcoming rate moves.

But its language on inflation was seen as worrisome to some.

"Though longer-term inflation expectations remain well contained, pressures on inflation have picked up in recent months and pricing power is more evident," the FOMC said.

On Wall Street, the US dollar strengthened against major currencies, long-term borrowing rates shot up and the Dow Jones stock average weakened on the Fed's warning.

 

[Sunfish]

Well last night's rise in the US has rocked the boat. I thought it was a sure thing though.

Contrarians of the world rejoice. The ASX is down 40 points. Get out your cheque books.

T

 

[madmurf]

Well last night's rise in the US has rocked the boat. I thought it was a sure thing though.

Contrarians of the world rejoice. The ASX is down 40 points. Get out your cheque books.

T

Well Thommo
Sounds lot a horse race if its a sure thing.
So what two things can you sure about in life.

Madmurf

 

[Peter 14.7]

Hello Thommo & All

Personally I think another rise is a certainty as I have since mid 2003. However after that I have no thoughts?

Some here are saying another 3% to come! That seems to high or am I simply acclimatised to low rates and should know better?

What the thoughts. Is mortgage rates of 9% possible in the next 5 years?

Peter 147

 

[Aceyducey]

In the next 5 years....mortgage rates a couple of % higher - definitely possible

9% is the long-term average for mortgage rates in Australia.

Cheers,

Aceyducey

 

[Peter_Tersteeg]

I'll through my hat in the ring and say that there probably won't be one next month, but there will be a 25% increase in the next 3 months.

PS. Acey, the first known instance of a working submarine was in 1623 . This obviously means that the Illuminati do exist...

 

[quoll]

I'll through my hat in the ring and say that there probably won't be one next month, but there will be a 25% increase in the next 3 months.

PS. Acey, the first known instance of a working submarine was in 1623 . This obviously means that the Illuminati do exist...

The dot makes a lot of difference, about 100% in this case.
0.25% compared to 25%

It's a quiet day. I have to find something to do.

cheers
quoll

 

[buzzlightyear]

Interest rates already increased

Given the commentary regarding the likely future path of oil prices, have we not already seen an equivalent effect or at least about to, of an interest rate increase?

Not only direct costs, but the flow on through business input costs and potentially higher prices. I know as a Procurement Manager in a large Australian manufacturing company, the upward pressure on inputs that we purchase have been steadily increasing over the past 6 months. Either consumer prices are going to be affected or businesses who do not have the ability to pass on these costs, are going to have their profitability affected.

http://www.theage.com.au/articles/2005/04/02/1112302288030.html

Economists say it is a toss of the coin whether the Reserve will lift interest rates on Wednesday. History suggests a rise of 25 basis points, to 5.75 per cent, rate rises usually coming in pairs. But there is an equally compelling case for the Reserve to keep its powder dry.

Looking at RBA history of increase rate rises, there usually seems to be at least two in quick succession.

http://www.rba.gov.au/Statistics/cashrate_target.html

 

[Aceyducey]

The RBA will do what they feel is right.

They won't raise interest rates based on 'tradition'.

Personally I've planned for an increase, but don't expect it to happen.

Cheers,

Aceyducey

 

[Ausprop]

I love this quote from Access Economics:

"First the Reserve Bank stuffed up by having rates too low for too long, encouraging a housing price boom," Access says. "Then the Government stuffed up by spending $66 billion over five years on boosting demand, when it actually needed to spend on boosting supply. Now the Reserve Bank is stuffing up again."

http://www.theaustralian.news.com.au/common/story_page/0,5744,12746116%5E2702,00.html

 

[BV]

I love this quote from Access Economics:

"First the Reserve Bank stuffed up by having rates too low for too long, encouraging a housing price boom," Access says. "Then the Government stuffed up by spending $66 billion over five years on boosting demand, when it actually needed to spend on boosting supply. Now the Reserve Bank is stuffing up again."

http://www.theaustralian.news.com.au/common/story_page/0,5744,12746116%5E2702,00.html

I couldn't agree more
RBA and govenment economic policies should not conflict.
They should get their act together and coordinate their moves.
Lets start with a new RBA governor.. and finish it off with a new government
cheers

 

[always_learning]

I think they will lift rates 0.25%, after review of reserve bank comments I believe they told us last month.

However bucking the trend I believe (after examination of the hairs on the back of my left hand) that unless the Australian economy does something dramatic, I suggest this will be peak, followed by a long period of stasis.

 

[Peter 14.7]

I think they will lift rates 0.25%, after review of reserve bank comments I believe they told us last month.

However bucking the trend I believe (after examination of the hairs on the back of my left hand) that unless the Australian economy does something dramatic, I suggest this will be peak, followed by a long period of stasis.

I agree and have believed so for a while. It could be the peak.

However rents will have to rise and prices drop in inner Sydney for some rental reality to return. Also we are less impacted by high petrol prices due to smaller driving distances.

Peter 147

 

[keithj]

They can't raise them next month because the budget is on the 10th May, so they'll have to do it this month......IMHO

 

[XBenX]

I couldn't agree more
RBA and govenment economic policies should not conflict.
They should get their act together and coordinate their moves.
Lets start with a new RBA governor.. and finish it off with a new government
cheers

While we are at it lets run a dirty float again.....