Interest rate rise?

[Gundini]

SYDNEY (Dow Jones)--Stronger than expected economic data have pushed the Australian share market lower by midday Monday, with investors fearing the Reserve Bank of Australia will tighten interest rates after Tuesday's board meeting.

Do you think the RBA will raise rates?

You would think a raise would push the AUD to 85 cents to the USD.

Can't be good for exports, housing markets, banks etc...

 

[falconx]

IMO if they don't raise them now they are just delaying the inevitable and will have to raise them in a months time. Hopefully this will be the end of it though.

 

[Buffettology]

I beleive they will rise.

The housing market is still overvalued, especially for newcomers to the market, a large governmental initiative to make it more affordable.

The major thing though, is the cash that is being throw around at the moment, something has to give, and the best way to contain it is with an IR rise.

Cant be good for exports, or trade balance. But last I read, exports are growing faster than imports due China etc. So this shouldnt have too bigger effect on that area of concern.

 

[Glenhaven]

I voted for no rise, but the data released to-day on retail sales make it more likely. I note however that building approvals are still falling and I still stay with no rise as a rise would put the building industry in a sharper decline. This along with an increase in mortgage defaults is a high price to pay.

 

[wayneL]

They should raise .5

Pain now is better than more pain later.

Parity anyone?

 

[Glenhaven]

I beleive they will rise.

The housing market is still overvalued, especially for newcomers to the market, a large governmental initiative to make it more affordable.

.

The decision of course cannot be directly influenced by the Government.

 

[Buffettology]

The decision of course cannot be directly influenced by the Government.

Of course, but I would think the RBA takes this into account (though, as an economist, I have not worked at the RBA (only for Treasury), so I am not 100% sure exactly on what basis the RBA decides rises. Of course, if the IR rise was going to crash the housing market, then they would not increase them, but a .25% rise is not going to do this, well at least there are very low probabilities.

 

[Knobby22]

They don't want to raise rates as the dollar is already too high but they want people to be more careful with credit. By the fact that everyone is expecting a rise, I think they have succeeded.

 

[bean]

Well we have several problems they raise interest rates the dollar gets stronger (stock market corrects 10% or more)
Leave interest rates unchanged inflation comes in play.

However they raise interest rates. then budget lower tax rates and thay way they put more money in (printed more) to keep things ticking along. and maybe some finds its way into the market so the correction isn't as bad.

By lowering the tax rates may stop the housing from falling as its like taking from one hand and giving back in the other

 

[Glenhaven]

I am surprised that the vote is strongly that there will be interest rate rise. Maybe I have to rethink as it will certainly impact our market.

 

[clowboy]

My yes vote will probally turn out to be wishful thinking

 

[Gundini]

They should raise .5

Pain now is better than more pain later.

Parity anyone?

I agree with the pain now theory wayneL, but .5 rise would send Western Sydney mortgage holders into a flap. They are already struggling to keep up repayments as it is. Then again you could argue this type of rise would certainly make housing more affordable for those without a mortgage. Also, a larger rate rise brings us closer to larger rate cuts, as the global slowdown starts to kick in.

Still believe .25 would be the maximun rise, although I am leaning to no rate increase, contrary to the poll ATM...

 

[Smurf1976]

I agree with the pain now theory wayneL, but .5 rise would send Western Sydney mortgage holders into a flap. They are already struggling to keep up repayments as it is. Then again you could argue this type of rise would certainly make housing more affordable for those without a mortgage.

It's truly amazing the lengths we seem prepared to go to in order to prop up the real estate bubble.

If only we put half as much effort into reducing poverty, fixing the environment, health, water, roads...

I'm expecting a 0.25% rise fairly soon. If not April then May or at the latest June.

 

[Gundini]

It's truly amazing the lengths we seem prepared to go to in order to prop up the real estate bubble.

If only we put half as much effort into reducing poverty, fixing the environment, health, water, roads...

I'm expecting a 0.25% rise fairly soon. If not April then May or at the latest June.

I totally agree Smurf, but I think the imbalance between the states is the bigger picture for the RBA The booming markets in WA and QLD needs to be curbed, while the sagging NSW market needs growth.

A case of damned if you do, and damned if you don't.

Smurf, you have my vote regarding reducing poverty, fixing the environment, health, water, roads... still, while there are many promises, there is less conviction!

This is why they describe the governments as "Mirrors"... Always looking into it, but all they see is themselves.

 

[noirua]

No interest rate rise needed and Premier, John Howard did confirm on Bloomberg that he realised the countries miners are hit by a strong Aussie Dollar. A bit of inflation isn't such a bad thing at times - John Howard didn't say that though.

 

[Bush Trader]

No interest rate rise needed and Premier, John Howard did confirm on Bloomberg that he realised the countries miners are hit by a strong Aussie Dollar. A bit of inflation isn't such a bad thing at times - John Howard didn't say that though.

I wish Mr Howard would put the rising dollar in context with our other export industries such as agriculture. What are farmers struggling to recover from a drought if commodity prices are put under pressure due to the rising dollar, and input have also increased due to high world demand due to expanded global plantings?

In regards to infation ask a Zimbabwean what they think of a little bit of infalation, 400% p/a was a walk in the park compared to 1800% p/a, all due to an eratic despots so called economic restructure and land reform policies

We have it easy compared to some.

Cheers


BT

PS: I believe that there will be a rate rise, the pain in the east will be used to curtail the excesses of the west. I forcast that the $A will get to 91c by June, this may cool the commodities job down a tad. The economy is strong enough to handle it, however there will be select groups that will feel much more than just pain.

 

[noirua]

I wish Mr Howard would put the rising dollar in context with our other export industries such as agriculture. What are farmers struggling to recover from a drought if commodity prices are put under pressure due to the rising dollar, and input have also increased due to high world demand due to expanded global plantings?

In regards to infation ask a Zimbabwean what they think of a little bit of infalation, 400% p/a was a walk in the park compared to 1800% p/a, all due to an eratic despots so called economic restructure and land reform policies

We have it easy compared to some.

Cheers


BT

PS: I believe that there will be a rate rise, the pain in the east will be used to curtail the excesses of the west. I forcast that the $A will get to 91c by June, this may cool the commodities job down a tad. The economy is strong enough to handle it, however there will be select groups that will feel much more than just pain.

Hi. If people believe what you say, 91 cents to the Dollar, then the increase in currency hedging will be enormous. How long ago were they talking about 50 cents to the US Dollar? Not that many years ago.

 

[Buffettology]

Final thoughts?

IR rise of .25% announced tomorrow. Market suffers a fall, rebounds soon after of course. Though still fear creeping into peoples minds, US announces bad economic climate as the year goes on, our dollar rises and puts some perssure on the commodities sector. More fear creeps in, by the end of the year, we see a crash or very large correction. I could see this taking place quiet easily.

Though I did hear today that inflation is not as much of a concern as previously thought.

 

[brendan87]

The other thing to remember that the more interest rate (hike) speculation there is ... which has pushed up the $A considerably since the last rate rise has a tendency to reduce import inflation. The price of imported products (many of which are members of the CPI "basket") goes down as the $A goes up. And the RBA is also aware of the rental squeeze (rent being a big part of the CPI - and recently, a main driver of the CPI!) and that increasing interest rates will make the rental crisis (and CPI) worse. However - in light of these arguments I still think the next rate rise is the one "we had to have" and sooner is better than later. And it would be more politically sensitive to hike rates 1/4 points now than closer to the election, PLUS, doing so now will hopefully temper whatever expansionary (ballot-buying) budget is released before the election. But it's nothing to get depressed about since many of us rotated some funds into cash over the last few months (and just received a cheque from a certain BHP-buyback ) and will aprecaite the extra .25% while waiting to better value coming up. Note; anyone who took profits around the time of the mini-correction can benefit from any coming interest rate rise in 2 ways: 1) better return on cash assets and 2) better able to take advantage of opportunities that will emerge as market valuations adjust to higher interest rates. ...... maybe I'm an optimist .... and maybe I'm trying to forget the fact that my ML rate will increase too...alas - that's just my worth

 

[bvbfan]

A rate rise looks like once in the next two months, I think the RBA will wait for CPI data on April 27 then hike at May meeting.

May provides us with a budget and let's see what goodies the givernment has in hand? Will they try to buy the election and fail miserably forcing the RBA to do another rate rise.

Maybe they will structure it so they will give you something if they get back in only for the RBA to take it all back and then some.
Seems Australians are dumb enough to fall for it again.