What will the Reserve Bank do? (12/03)

[Aceyducey]

Where do you think interest rates will go in December and why?

Only 40% of voters got it right last month....

http://www.somersoft.com/forums/showthread.php?s=&threadid=12621

So you should have disregarded the views posted by everyone else over the last 4 weeks

Cheers,

Aceyducey

 

[Jas]

Stay the same.

People are still in shock over the last one. The RB will let things play out until after Xmas before thinking about hitting us again.

Jas

 

[MarkB]

Now they've called their hand I think that the RBA's December meeting will give us another 25 basis points rise (though I openly admit that I was wrong last month when I said they would hold).

MB

 

[Dos]

Hi all,

I think they will rise again by 0.25%. My feeling is that they will strike while the iron is hot. Spending at Xmas won't be as big as expected and then they will lay low.

Dos

 

[Peter_Tersteeg]

I've gotta agree with Jas on this one.

There's the perception that last months increase has had a major impact. As we're getting into the holiday season, there'd be little impact beyond what we've already had and what the market normally does this time of year anyway. From perception point of view, there's little point in changing rates at the moment.

There's also a lot of talk about there being no need for the last rate rise in the general economy. True or not, this adds further fuel to my argument.

I beleive that we may see another rise early next year, possibly in Feb, but more likely in March. In terms of the property market this could be used to push further the 'boom is over' mentality. It will be the overall economy that determines this however.

I think that this months statement will be a cautious one.

 

[Mondie]

Disclaimer - l was wrong last month.

But l agree with the others, l think they will bump them another 0.25% to really drive home the message about reducing personnel borrowings, and to try to cool the market off. Personally l hope they do as it will give us the best chance of minimal or no rises into next year. If the RBA dont raise next month and things pickup again then interest rates may rise even higher to cool things down to what the RBA deems acceptable next year.

But then in the past few days there has been talk of drops next year, so you can use all sorts of logical arguments to make educated guesses but thats probably all they are.

 

[ger]

Interest ing link below
I found today

http://www.news.com.au/common/story_page/0,4057,7991392%5E421,00.html

The lift in rates could come at a high cost, with the risk the investor-driven construction market may face a crash.

 

[Fester]

I'll put any hair I have left on a 0.25% rise. No doubt about it!

 

[spark]

I think they decided to get to ~6% eventually, so, to avoid the proximity to next year's elections (when the pressure on the RBA will grow), instead of slicing 25 each month they can get to 5.5 right now, to get done with it quicker. IMHO

 

[Bill.L]

Hi all,

I was wrong last month, but this month I'll agree with Jas. They can see the first one has had a major effect, and the $A is still rising. Better to see where we are at by feb, and then raise in both feb and march if things are still out of hand(too much borrowing). That may then clear the path up to the next election for no change for a few months.

bye

 

[jahn]

Hi
My vote would go for no change untill after New Year, then .25% up.
It does seem the last change had a bigger impact than I thought a .25% rise would have. (still have a good memory back when the rates seemed to only ever go up by at least 1% and come down by .25% )
jahn

 

[JoannaK]

I think they'll remain unchanged. As someone else mentioned, there is a perception now that last month's increase has had the desired effect for now.

 

[brains]

I vote for a rise of .25%. It seems the RB want to send a clear psychological message rather than the actual effect of the rate hike. They are determined to knock this property price boom out cold, before it ruins the economy and maybe them out of office. If we had a viable opposition....ahhh...wishful thinking.

 

[Peter_Tersteeg]

Going by the comments, I think we can all agree on one thing:

Rates may or may not rise this month, but by early next year, they will be higher than they are now.

 

[Aceyducey]

I vote for a rise of 0.25% as well

My views have been posted previously - the RB wants to change the perception that interest rates are static or declining & reinforce to people that rates are increasing.

If the RB holds off, people may begin feeling that the rate rises have ended

Of course they could hold off but be very stern in their announcement 'we control interest rates & are not afraid to use them, behave yourselves or rates will rise futher' - but this doesn't work very well on kids and in my experience, not that well on adults either

I do find it interesting how much perceptions have shifted, however.

Last month it was roughly 55/45 in favour of rates not increasing. This month it is 40/60. So 15% of people have changed their perception of the interest rate trend.

Now that's not a bad shift in perception by the RB (roughly 30% change), considering all they did was move rates by 0.25%!

Cheers,

Aceyducey

 

[Peter 14.7]

I was not in the forum last month but would have voted for rise (yes I would have...really) Im in for another 0.25% now.

Drum roll please. The top ten reasons the RBA will raise interest rates are:

10. RBA is using "shock and awe" against the speculative investors one rise is only shock.
9. Agents will go to town "no more rises" , Get in now" rate to lower" etc..
8. Our ecomony is fundamentally strong and another rise ain't going to hurt that much o/a..
7. Stich in time..... rise now and not in an election year so much and buy inflation insurance at a lower pain threshold.
6. Figures out since rise prove they were right to rise in Nov.
5. Aussie Dollar has stopped going up and last rise didn't skyrocket it. Dollar being driven by growth, and rise will sting growth.
4. January rise will go unnoticed at the beach (does anyone read the paper in january?) so they would have to wait until Feb and risk a larger rise?!?!
3. Do it now.... be the baddies until X mas comes and when the election campaign starts with new labour leader et all will be forgetten in the NEWS and go back to wine and cheese every month at RBA meeting for most of 2004.
2. Dec. Rise will start taking effect in the two weeks before X mas ... less money to spend on the shops at the right time.

and NO 1.

1. Because they can and every says they will/ should not!

Regards
Peter 147

 

[Les]

Yeah, I, too, voted for another 0.25% rise. Why?? Well, probably because the RBA lifted rates in the past when they shouldn't have. And I do agree with those that state that it is easier to be "the bad guy" quickly - get it over and done with - then hold.

The significant point (to my way of thinking) is that 0.5% is a HUGE increase in times of low Interest Rates - and it will certainly "shock and awe" as others have quoted. 0.25% last month, followed by 0.25% this month, and that sends a very clear signal to anyone wavering on the edge.

What effect will it have? Well it might drive the Aussie dollar up a bit more (US0.74c ??) but it will achieve (in the property market) a "cooling" of the property market for a while.

I believe they will hit again in Dec 03, cool the property market, then turn their attention to the rising Aussie $. Get one problem out of the way first, then turn their attention to the other !!!!

Regards,

 

[Kenkoh2000]

What will the Reserve Bank do?

Peter 147 and Les,

Your arguments sound logical and persuasive...

But let us hold our breath and wait to see the outcome next week...

It interesting to note the outcome, whatever. ..I'm now beginning to learn more about RBA and the Australian property investing market with each poll votes taken.

Majority of forumites who polled, failed to forecast the last rate increase correctly last month, though.

regards,
Kenkoh2000

 

[ToGetProperty]

I predict the interest rate will be unchanged because Australia is not big enough to against the whole world of low interest rate. If it did increase, our dollar will go to the roof. It will cost our export industries as well as building industry, and turn our economy into recession very easily.

When was the last time of the unemployed rate being around 6%?
What after that? It was a long and deep recession, wasn't it?

 

[MJK]

I imagine an interest rate hike in December would be very hard on the retail sector ( Xmas period ) This could be another factor against.
I would have thought the RBA would need to drive its message home to borrowers, but its aufully bad timing.

MJK