Are interest rates going to be put up?

[ta2693]

I hear the interest is going to rise on this Wed.
"By providing evidence that the sub-prime debacle has not knocked the economy off the rails, today's figures just bolster fears that the RBA will fell compelled to raise the overnight cash rate to 6.75 per cent on November 7, the morning after its next board meeting."
http://www.smh.com.au/news/business...rates-will-rise/2007/10/31/1193618939761.html

What do you think? Is the interest going to increase for sure?

 

[Spineli]

Re: interest rise

Certainly an increase.

My query is whether it will be a 25 or 50 basis point increase?

I wonder how much attention the central bankers would have paid to the news that came out of Citi overnight, i.e. the prospect of an additional ~$11bn writedown at Citi in the coming quarter(s)...and the potential for further writedowns at other major banks with significant subprime exposure...

To add to that...Kevid Rudd quotes Mr Howard yesterday as saying "that inflationary pressures were unavoidable"...

Unavoidable to what extent?

 

[bvbfan]

90 bank bill futures were nearly at 7.5% for June 2008

Go baby go!!!

 

[ta2693]

The market is up 0.7% so far. I plan to short S&P index to hedge my long position to protect the impact from interest rising tomorrow.Does anyone know what time the new interest rate will come out tomorrow?

 

[ta2693]

90 bank bill futures were nearly at 7.5% for June 2008

Go baby go!!!

Do you have a large short position? bvbfan

 

[Kauri]

The market is up 0.7% so far. I plan to short S&P index to hedge my long position to protect the impact from interest rising tomorrow.Does anyone know what time the new interest rate will come out tomorrow?

A good spot for finding times etc for economic anns... http://www.dailyfx.com/ ..
Cheers
..........Kauri

 

[ta2693]

thanks a lot for this useful website.

 

[explod]

I feel rates may be left unchanged.

from Ken Davidson, todays Age :-

"...
* The acceleration in inflation is connected to the supply side of the economy, not demand.

* Four of the five interest rate rises since the last election have been within the past eighteen months. This is still within the outer band of the 12-18 month lag between rate rises and their full impact on demand.

* Most of Australias non-mineral export and import competing industries are already under stress because of the strong Australian dollar. Postponing a rate will ease pressure on the dollar. An increase in inflation because of prices for oil, vehicles and plasma screens is a necessaary trade-off to structural changes to make Australia externally viable.

* While nominal rates are low, real rates are high and the level of debt (an unsustainable 160 per cent of gross domestic product) is far higher than the previous two debt bubbles, which precipitated the 1890s and 1930s depressions. " [end quote}

The article goes on to outline that debt here is a greater danger to our prosperity than inflation.


The other aspect that has struck me is that if there was no rise then John Howard led by Costellow will be able to say that recent economy tweaking have saved the day, that it is all coming good. After having apologised for rising rates last week could this be the politcal rabbit out of the election hat.

I am not convinced that any Institution is independant of government pressure.

It will be interesting to see what pans out tomorrow and the ensuing days if rates are held back.

 

[Julia]

Explod, if interest rates are not raised, then there is going to be a lot of flack levelled at the Reserve with regard to "political interference" etc.

 

[explod]

Explod, if interest rates are not raised, then there is going to be a lot of flack levelled at the Reserve with regard to "political interference" etc.

I dont believe so Julia, as the rationale outlined by Davidson would appease and be welcomed by by most. I believe there has been an over emphasis on the independance of the Reserve over the last few months for just such a rainy day. And a few weeks out from the election could be it.

Anyway, just my feeling, could be proved very wrong tomorrow.

 

[bvbfan]

Not much of a short position, only on OXR at the moment.

But I am bullish AUD so waiting for a chance to get long again. In hindsight yesterday was a good chance but I'll see if I can get set tonight during US/European session for the RBA announcement tomorrow.

 

[rub92me]

Looks like the majority are expecting a rate rise, which could mean that the market has factored this in already. What would be the effect if they don't raise the rates? And how relevant would it be compared to or in combination with the effect of a 200 point move up or down on the DOW overnight? Far too volatile at the moment for me to try and guess what's going to happen.

 

[EZZA]

i'm following the crowd thats what all the talk is about, pretty much all the economists are saying they will go up, and inflation above the 3% mark can't see it going any other way. probably a few more to come by the looks of it.
one this month, one early next yr, potentially more. i'm hoping back we will be peaking soon but there aren't any signs of slowing yet.

 

[vishalt]

I can't see inflation peaking really.

I mean common, people are earning AND spending heaps, a lot of people can't be stuffed saving.

With more tax cuts to come, unemployment to fall, a strong $A (which will boost spending even more) can anyone see inflation peaking?

I'll go as far as to say after those massive tax cuts during in whichever party gets nominated - inflation will stay around this band for a while and rates will go up to 10% by 2009 early 2010 till it constricts the consumer that much.

 

[explod]

I can't see inflation peaking really.

I mean common, people are earning AND spending heaps, a lot of people can't be stuffed saving.

With more tax cuts to come, unemployment to fall, a strong $A (which will boost spending even more) can anyone see inflation peaking?

I'll go as far as to say after those massive tax cuts during in whichever party gets nominated - inflation will stay around this band for a while and rates will go up to 10% by 2009 early 2010 till it constricts the consumer that much.

Have a think about the rate of inflation at 3% say. Food, housing, oil you name it have all gone up more than 3% in the last 12 months and for a number of years before. But the bean counters dont' count a lot of things, why, cause its political.

Same as American job numbers going up, they nicely dont subtract the jobs that have gone. Figures coming out of governments, like the banks that are going to the wall have been fudging the figures for years.

Have a good think about what is really going. We have been hoodwinked for years and I say the stage is set for no rate rise tomorrow.

I grew up to parents out of the great depression, they told me how the establishment fudged the figures and robbed the people back then too. Mark my words, nothing has changed.

Just like the military dictator of Parkistan, he has been one of GWs. great warriors against terror. In fact John Howard said he spoke to him on the phone the other day. Perhaps they breed the terror and the terrorists for a good reason. Keep you all scared and believing the crap.

 

[professor_frink]

Have a think about the rate of inflation at 3% say. Food, housing, oil you name it have all gone up more than 3% in the last 12 months and for a number of years before. But the bean counters dont' count a lot of things, why, cause its political.

Hi explod,

what exactly is not counted towards inflation here in Australia?

 

[Kauri]

A breakdown on todays rate ann.. not the last by a long shot
Cheers
..........Kauri

November 7. As virtually everyone expected, the Reserve Bank of Australia lifted its cash rate target 25bp to an eleven-year high of 6.75% in response to the worse than expected underlying inflation results for the September quarter. The move was the first to occur during an election campaign and may cause some further damage to Prime Minister Howard's bid for a fifth term in government, particularly given his promise at the last election in 2004 to keep interest rates at record lows. Since then, interest rates have risen six times and today's move looks unlikely to be the last given a robust economy, tightening labour market, relatively loose fiscal policy and of course rising food and energy prices that should probably have been met with policy tightening earlier in the game.
The central bank explained its move as a response to the stronger pace of economic growth this year and few signs of that slowing. It said that growth in aggregate demand will "need to moderate if inflation is to be kept to 2-3 per cent in the medium term." It also mentioned that both headline and underlying inflation measures are likely to be above 3% by the March quarter (IFR thinks by December, see below). The RBA also noted that so far funding costs in Australia had not been overly pressured by global credit pressures. More will become clear in next Monday's quarterly Statement on Monetary Policy that will contain the central bank's projections for interest rates, inflation and economic growth. Speculation that it might lift its forecast for underlying inflation to 3.25-3.50% in the Statement would suggest that it finds itself behind the ball in policy and would raise the risk of another move as soon as December.
Now thoughts will turn to the RBA's next move. Given the underlying tenor of the economy and the upside risks to inflation from wages and prices, exacerbated by hefty public- and private-sector investment intentions, IFR expects the two moves so far this year to be far from the last. Indeed, a year from now IFR expects the cash rate to be fully 75bp higher at 7.50%, again with the risks largely to the upside. Rising food and energy prices should be enough to justify another move in December without confirmation from the CPI report in January; a hawkish Statement next week would lift expectations of such a move. Barring that, another rate hike looks odds-on in February, as the December quarter inflation result will definitely see headline inflation jump above 3% with underlying inflation close behind. But there are also dangers from the perception that the central bank is taking a reactive approach to policy setting, namely that inflation will get out of hand as the RBA focuses on the recent past. The situtation would be rather better today had the central bank moved pre-emptively last February as was widely expected at the time--and might have helped avoid the need for a controversial move during the election campaign.
About the only serious clouds on the horizon are the continued sub-prime problem that may push the US into recession, and the strength of the AUD as a result of the slumping dollar. The sub-prime problem may keep upward pressure on interbank rates, thus mitigating the need for a policy rate hike (though this might still be necessary to prevent a take-off in inflationary expectations that are unlikely to be too affected by moves in a market that most do not understand). Demand for Australia's commodities should remain strong with no sign that the major economies in this region (apart from an already weak Japan) will slow by much even if the US suffers a period of consolidation. Moreover, the strong dollar will help insulate Australia to some degree from the surge in oil prices, though this will be more than offset by the drought-induced jump in food prices expected over the next several months. There seems little at this point beyond a global financial meltdown or recession that will prevent further steady tightening in Australia's monetary policy.

 

[krisbarry]

I just maxed out 4 credit cards over the past month buying Ipods just to make sure inflation would increase and todays interest rate rise went through....woo hooo!

Ohhh blame it on generation X and Y...we love our Ipods, no wonder we cannot afford homes, we are just to damn busy maxing out credit cards

 

[noirua]

All these rate increases are strengthening the Aussie and doing quite a lot of damage to companies that are paid in U.S. Dollars.
Are interest rate increases infact damaging the Australian economy in an insane effort to keep inflation down, as a first priority?

 

[Smurf1976]

Hi explod,

what exactly is not counted towards inflation here in Australia?

House prices would seem to be one. The single biggest expense for most ordinary workers with a price rise that in itself would have blown the 3% inflation target clean out of the water in recent years.

3% inflation is an outright joke. Most Australians watch TV on a tube, not a plasma, and don't yet have a DVD recorder. Nor do they keep constantly replacing any of the other things that have dropped in price. And with the exception of Tas, even digital set top boxes aren't found in most homes.

But they do buy petrol every week. They eat food every day. They get power and rates bills every quarter. They pay house, contents and car insurance and their kids go to school. All of which are getting rather expensive.

I often wonder where exactly those compiling the inflation statistics do their shopping? I'm guessing they spend a lot more time in Harvey Norman looking at electronics than in Woolworths buying food, the exact reverse of what most people do.