Will The RBA Move On Interest Rates Next Week?

Discussion in 'Property Finance' started by Garry Mac, 29th Oct, 2010.

  1. Garry Mac

    Garry Mac Member

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    Good afternoon all

    One of the most pressing questions at this time every month is…will the RBA raise interest rates?

    Whether it does or does not will be revealed next Tuesday. However notwithstanding the RBA’s decision, I believe there is a far more pressing question: will the banks raise interest rates independent of the RBA?

    For what it’s worth AND it’s only my opinion, I don’t believe the RBA will raise rates next week. I’m convinced there are very good reasons not to do so including a manageable rate of inflation and reasonable unemployment numbers. However there is a much more important reason to (at least) postpone any rate rise; and that is (as the infamous John Laws once…or twice said), those folks in ‘struggle-street’ are really struggling.

    I get around a bit and speak with both business people and investors AND I can tell you many are struggling to survive, let alone grow their businesses and/or investment portfolios.

    Regarding the far more pressing question mentioned above, unfortunately I have a very uncomfortable ‘gut-feeling’ that the banks are about to move rates up. And this contention is gathering momentum. Commonwealth Bank CEO Ralph Norris, at its annual general meeting, highlighted the increasing costs of funding…usually a clear indication that a decision has already been made. This also signals to other financial institutions that a rate rise is in the wind.

    What's your opinion?

    Cheers
    Garry
     
  2. Brett IP

    Brett IP Member

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    Rather frustrating that the big 4 have posted (ANZ & NAB anyways) massive profit increases over and above previous years yet state "between the lines" that they need to increase the rates higher than the RBA increase to cover costs. Poor babies, the banks are really struggling !!

    My thoughts.....they are too greedy :( & will most likely raise them independently
     
  3. Player

    Player Live Every Day

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    No rise next week. The quadropoly will eventually pull the trigger and do the RBA's work. ;)

    Based on how things are chugging along for now and sentiment on the streets IMO, we may not see a rise till March next year (from the RBA). I certainly didn't have this view several months ago; I was more bullish on rate rises earlier this year. Don't fully dismiss another 0.5 - 1.0 % in the next 12-18 months.

    Interesting times. :cool:
     
  4. WinstonWolfe

    WinstonWolfe Richard Werner fan

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    I'll stick with the Westpac Melbourne Institute view, which is no rise until at least Feb 2011.

    Their reasons :


    The leading index of economic growth has now fallen for 5 consecutive months (10.3 to 5.3%). The peak is behind us.

    Long term trend growth is 3.1% and the index is still above that at 5.3%, but is expected to keep falling to create an average 3.5% growth this year.

    2011 growth is expected to be 4% and opinion is mixed on remaining the same or falling to 3% in 2012.

    Recent factors favoring increased economic growth = corporate profits,
    commodity prices, real money supply, US industrial production.

    Factors not favoring = all ords, dwelling approvals, overtime worked, productivity.

    RBA October board minutes more dovish than September.

    Higher AUD to restrain inflation.
     
  5. oracle

    oracle Member

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    I tend to agree that RBA may hold off raising rates next month. Banks I believe will try to sneak in 15 to 20 basis points irrespective of what the RBA does IMHO.

    Cheers,
    Oracle.
     
  6. csc2

    csc2 Banned

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    either way dont care...although i hope it rises by another 1.0% over the next 6 mths....bargains will abound as there are many overcommitted already and are struggling to meet repayments and will cut their losses and sell out or downsize..

    its not caused by interest rates but by going in too deep over their heads borrowing...rates are low, homes and cost of living generally is high...that's the killer currently with many punters..

    smaller wage earners, say under $40k year are struggling big time as they borrowed heavily when banks were throwing money at anyone....and theres plenty of them earning basic wages of $20k - $40k...
     
  7. Intrinsic_Value

    Intrinsic_Value Member

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    agree with all your comments. Although i would point out that its not the new cost of funding for banks that is increasing, but the average cost of funding (as old pre GFC cheap funding gets rolled over at higher funding costs).

    Best scenario RBA leaves rates on hold and the banks increase by 20 basis points.

    And for those that think bank interest rates should be controlled, try operating in an environment of credit rationing. Imagine rocking up at the bank and being told oh sorry we are only interested in LVR's less than 70%, or that IO loan is going to have to be P&I now, we are no longer comfortable writing IO loans.
     
  8. Intrinsic_Value

    Intrinsic_Value Member

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    have you bothered to check out the actual size of the banks.
    CBA is now 'worth' around $76 billion dollars.

    Profit should always be viewed relative to size.
     
  9. Brett IP

    Brett IP Member

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    Nope, just going by the percentage increase year on year as told by the media. The media are always right arent they :)

    Dont worry, I realise that people who already have money want interest to increase, just like shareholders want more profit, I understand the cycle. I just dont feel banks are lenient, put it that way.
     
  10. willair

    willair xx

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    I think the Big 4,and all they control under them will raise rates next week no matter what the Mr Swan-the RBA talk in the media about
    nothing to worry about Garry,a person like yourself with your background would have seen this happen before and before that,the real problem is if those on struggle struggle street stop spending..willair..
     
  11. rachels

    rachels Member

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    Up, no way, if there was going to be a change it would be down if anything! ;)
     
  12. PeterC

    PeterC Member

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    i like your optimism but it wont be coming down. no move this month. RBA will have the usual 'nothing this time but maybe in future depending how things pan out'

    banks have been waiting for RBA to raise so they can tack on their raises, wonder if theyll go it alone if RBA doesnt look like its gonna raise any time soon. guess we'll see how employment and retail figures go.
     
  13. Aaron Sice

    Aaron Sice Seldom Seen Kid

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    no movement.

    too fragile to do anything up OR down.
     
  14. kanad

    kanad Member

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    Reserve bank has increased interest rate by .25% to 4.75%
     
  15. WinstonWolfe

    WinstonWolfe Richard Werner fan

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    I reckon that will knock another 1% off the Residex monthly Brisbane median (september vs november). Will have to wait 6 weeks to find out.
     
  16. sash

    sash Member

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    Yep...great to see...got it wrong last month....and thought was only a 50% chance this time around.

    This should now start taking further steam out of the housing market......the amateur punters will be panicking about now.....I expect another in Feb. 2011 when it really hammers home the point..

    The third raise is a question mark....can't see more than another 0.5% rise. Taking the base IR to about 7.35%.

    I am preparing for rates dropping with fixed rates leading in mid-late 2011.

     
  17. Brett IP

    Brett IP Member

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    Up goes the rents :D
     
  18. buzzlightyear

    buzzlightyear Member

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    Increase demand in labour, the economy is now subject to a large expansionary shock in terms of trade and relatively modest amounts of spare capacity, stronger private spending over the next couple of years, especially in business investment.

    All comments from the RBA's decision today. That's a not a bad prognosis.
     
  19. Brett IP

    Brett IP Member

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    Now we wait for the rest of the rise, from the banks
     
  20. random

    random Member

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    I usually do but this mth I have absolutely no idea , gonna be interesting!

    Cheers