RBA's Unofficial Briefings: Interest Rates Headed Down Soon

[annie lumen]

Well placed journalists are being unofficially briefed by RBA economists that rates may be headed down in the very near future. The interest rate cycle has clearly turned, just as the dollar has soared to new post-float highs.

Here's an article that should arouse some interest:

http://www.news.com.au/money/intere...d-be-cut-by-june/story-e6frfmn0-1226029863080

I recall somebody mentioning the same on these threads a few weeks ago. He or she was branded a heretic at the time. It's interesting how times (and cycles) change.

Enjoy! I think we all deserve a break.

 

[Deltaberry]

Oh Morgan Stanley's the same ibank calling a crash in property prices though... think they published some report saying it's 40% overvalued and it looked like a rehash of the Economist analysis

 

[Andrew_A]

Well placed journalists are being unofficially briefed by RBA economists that rates may be headed down in the very near future. The interest rate cycle has clearly turned, just as the dollar has soared to new post-float highs.

The markets have factored in some possibility of lower rates in the near term after the Japanese disaster, otherwise it's business as usual heading forwards 18 months with the trend still up.

http://www.asx.com.au/sfe/targetratetracker.htm

 

[annie lumen]

Sometimes, well-placed foreign journalists are privy to news our local people either don't have access to or don't care about. France 24 (a French TV channel) has reported on the possibility on the next RBA move being down, as have Bloomberg TV and CNBC. All are fairly reliable news sources.

When the rate cut happens (and it will be sooner than most people think) you can say you heard if first on SS.

In a few weeks, the the local press might cotton on to the story.
Oh well, back to news of the St Kilda footie players and their young lady friend......

 

[Ausprop]

does this mean the resources boom is definitely cancelled? or wil this just be a dip down and then straight... a sort of RBD dead cat bounce

 

[annie lumen]

does this mean the resources boom is definitely cancelled? or wil this just be a dip down and then straight... a sort of RBD dead cat bounce

I suspect that the resource boom is alive and well. But we are living in a two tier economy and the non resource part of the Australian economy is weakening rapidly, thanks partly to a soaring Australian dollar and anemic consumer confidence.

Rather than shake my head in disbelief at the news, I'm choosing to breathe a sigh of relief. I think most battlers deserve a break in interest costs.

It would be premature to guess how many rate cuts are headed our way. Nor can one safely speculate as to the effect on the property sector. But one thing is for certain - there will be no more rises for at least a year, possibly longer. Or so the respected commentators at Bloomberg TV, CNBC etc seem to say.

 

[Aaron Sice]

I cant wait for the permabear spin on this.

Or the permabull, either.

Dang....where did I leave that popcorn?

 

[tom32]

I think the article was pretty clear, if we continue to get weak consumer data then interest rates will fall.

As we have not got a mad captain bligh leading our reserve bank this is really to be expected.

I suspect though the weakness is going to be short lived. The investment pipeline is really only ramping up now.

As I've said before I don't see the minerals boom lasting forever, but while money is being pumped into Australia capacity will continue to be stretched and hence so monetary policy will continue to be tight.

I'm not disagreeing with the article only pointing out the big caveat contained within. If we continue to get weak data month on month...

 

[Intrinsic_Value]

Personally i dont think there is much leeway for rate cutting, if one is lucky maybe 25 basis points. I think the RBA is quite happy with its 'mildly restrictive' monetary policy. It wants to keep thing this way so that if seriors problems do occur they have kept the keg dry and ready so to speak.

RBA rates are not high, its the expansion in bank lending margins which makes the rate to consumers feel high. Therefore to create an efficient lending market lending margins need to come down. In the current environment i think this is wishful thinking (but could come in the next couple of years).

Anyway i'm playing conservatively, if a interest rate reduction comes, then thats icing on the cake, but im not basing my strategic decision making on any near term interest rate reduction.

 

[craigb]

it happens when it happens although all pie in the sky untill it "happens"

when homes are 500k as opposed to the 3<400k price range is becomes apparent that 7% from one to the other is breaking point for buisinesses and familys now a days, 24k ayear to 35k as it is now?

 

[buzzlightyear]

One contrarian thinks interest rates will do down. Does not make it any more likely. It would also be one of the biggest policy turnarounds for some time by the RBA.

You would also have to ask yourself, in the unlikely scenario that they were reduced, how much of those would pass through to lending rates. I am sure the big 4 would pocket some of that reduction.

 

[bluestorm]

I cant wait for the permabear spin on this.

Or the permabull, either.

Dang....where did I leave that popcorn?

Well here we go then. Popcorn ready?

With a resources boom (though China is slowing), massive world stimulus the past 3yrs which is now leading to world inflation, a supposed strong Australia economy, low unemployment, wage growth, interest rates still below histiric average, you would expect nothing more than Interest Rate increases in Australia.

If some economists however are now starting to talk interest rate falls, than perhaps everything is not as rosy as everyone would have you believe. The only way that interest rates will fall is if the world is in a bad state, and interest rates need to fall (as they did in GFC1).
The RBA however will be fighting inflation. Can anyone say Stagflation and a repeat of the 1970's? The RBA will find it very hard to change policy and have inflation exceed their target range. If they are forces to, then Australia is is trouble and it's nothing to celebrate.

Portugal will either default, or need a bailout in April (as predicted) here by your truely 10yr bonds now at 7.98%.
Portugal 10yr bonds
Spain will follow after this.

PIIGS still have problems, the US is buggered, China is slowing, the Arab world is in turmoil (should Saudia Arabia at any point should deteriatate, than expect il at $150/barrel).

Any lower interest rate will be nothing to cheer about. As I suspect, we are in the eye of the storm currently and the next leg of the GFC will be through 2011 and to the end of 2012.
With no money left for stimulus this time, house prices are heading for a correction.

Everything is nicely playing out as I'd expected.
Add more properties to the portfolio in mid-late 2013

 

[andrew_de_a]

^^ I thought you had left

 

[bluestorm]

Just a cameo appearence.

I'll be off again. Back occasionally as the ducks line up, and 2011/2012 proves to be as expected.

Someone has to keep the property bulls on here in check with reality after all.

 

[Peter 14.7]

Hey, I fixed in Jan 2011 at 7.1% for three years. Dammm

Seriously, in the present turmoil world wide, I am glad to be fixed and sad it is not 5 years. Why?

The same logic I apply every time I fix:

If rates go down, prices go up, so my pain (of say 1% over) is offset by CG.
If rates go up, prices stay flat, rents go up.

Personally in my 21 years of property ownership and 13 years of property investing I have noticed the RBA moves slowly and will be loath to drop a token 0.25%, when it is very likely they will have to rise again in the future. The GFC drops were a one off that had not happened for 80 years. In 1990 recession rates moved up quickly to 18% over two years and then creep down over the next 7 years. And in the present climate if the RBA drops 0.25%, what will force the banks will follow with the full amount. The RBA called the banks bluff in Nov 2010 and lost.

The argument for a drop of rate drop is based on disasters and politics, not economics. These events are simply pushing the next rise further away.

AND

Any spend of money is a stimulus. Many of us are about to give $500 each to Queensland for the flood levy. They will build new houses and employ trades and buy materials. Same in Japan in a year or two. Victoria still has many homes yet to be rebuilt from the Bush fires.

The issues in the Middle East affect oil price but, in my opinion, that is going to rise in any case. This simply makes the rise earlier and hence move to other energy sources closer.

What I really fear is mismanagement by our Gov.

Keating in 1990 overcooked the rates and we got the 1990 recession we had to have. Now a key Keating adviser of the era is about to join the RBA.

Peter 14.7





AND

 

[Ausprop]

Everything is nicely playing out as I'd expected.
Add more properties to the portfolio in mid-late 2013

it may or may not do but the only thing I can see that has played out for you is some blokes opinion that rates may fall.

 

[MC1]

Sometimes, well-placed foreign journalists are privy to news our local people either don't have access to or don't care about. France 24 (a French TV channel) has reported on the possibility on the next RBA move being down, as have Bloomberg TV and CNBC. All are fairly reliable news sources.

When the rate cut happens (and it will be sooner than most people think) you can say you heard if first on SS.

In a few weeks, the the local press might cotton on to the story.
Oh well, back to news of the St Kilda footie players and their young lady friend......

haha great post

 

[Aaron Sice]

The RBA however will be fighting inflation. Can anyone say Stagflation and a repeat of the 1970's? The RBA will find it very hard to change policy and have inflation exceed their target range. If they are forces to, then Australia is is trouble and it's nothing to celebrate.

most of the forum have been saying stagflation is here, through one form or another, for the past 6 months. not sure what the point of your tone is....?

Keating in 1990 overcooked the rates and we got the 1990 recession we had to have. Now a key Keating adviser of the era is about to join the RBA.

that's news! and worrysome at that....it's funny how people with credentials that got it right the first time end up going away for a (long) time and coming back with dumba*s ideas. i do hope he's avoided a visit to Bernanke's camp....

 

[Deltaberry]

With Keating advisors on board, you'd think there'd be 20% interest rates and a crashing market with 20% unemployment

 

[Beebop]

I suspect that the resource boom is alive and well. But we are living in a two tier economy and the non resource part of the Australian economy is weakening rapidly, thanks partly to a soaring Australian dollar and anemic consumer confidence.
.

Or high cost of housing.