Interest rates - where are they heading?

[trainspotter]

Let's see if it gets passed on to term deposit rates. The last two rises haven't in most cases, and the longer term deposit rates are actually lower than they were a couple of months ago.

What sort of rates do the banks pay if they borrow on the international market?

Click on the link for the info Julia.

World Interest Rates Table
Major Central Banks Overview
Central Bank Next Meeting Last Change Current Interest Rate
Bank of England May 10 2010 Mar 05 2009 0.5%

Bank of Japan May 21 2010 Dec 19 2008 0.1%

European Central Bank May 06 2010 May 07 2009 1%

Federal Reserve Jun 23 2010 Dec 16 2008 0.25%

Swiss National Bank Jun 17 2010 Mar 12 2009 0.25%

Bank of Canada n/a Apr 21 2009 0.25%

The Reserve Bank of Australia n/a May 04 2010 4.5%

http://www.fxstreet.com/fundamental/interest-rates-table/

Borrow money from a country with a LOW interest rate and pump it into the cartel of banks we have in Austrayaa and VIOLA 3% ON YOUR MONEY FROM PRIMARY LENDER ( Let's go for bank of Canada) then give it to the Aussie home owner at 7.5% and suddenly we have over a 7%+ RoR ... Ooopsies !

 

[trainspotter]

Is it just me or does anyone see the irony in this Government spending on stimulus packages and blowing billions of dollars on handouts and feel good propoganda whilst the RBA is doing it's best to slow down an overheated economy?? WTF ??? No seriously .... WTF???

2 speed economy I hear you blabber .... soon to be a one speed with no chance of ever recovering.

 

[Julia]

Click on the link for the info Julia.

World Interest Rates Table
Major Central Banks Overview
Central Bank Next Meeting Last Change Current Interest Rate
Bank of England May 10 2010 Mar 05 2009 0.5%

Bank of Japan May 21 2010 Dec 19 2008 0.1%

European Central Bank May 06 2010 May 07 2009 1%

Federal Reserve Jun 23 2010 Dec 16 2008 0.25%

Swiss National Bank Jun 17 2010 Mar 12 2009 0.25%

Bank of Canada n/a Apr 21 2009 0.25%

The Reserve Bank of Australia n/a May 04 2010 4.5%

http://www.fxstreet.com/fundamental/interest-rates-table/

Borrow money from a country with a LOW interest rate and pump it into the cartel of banks we have in Austrayaa and VIOLA 3% ON YOUR MONEY FROM PRIMARY LENDER ( Let's go for bank of Canada) then give it to the Aussie home owner at 7.5% and suddenly we have over a 7%+ RoR ... Ooopsies !

With apologies for my ignorance about inter-bank practices, would e.g. our local banks actually be borrowing from any or all of the above banks at those rates? Is money freely available now?

If so, then no wonder deposit rates haven't moved in line with the Reserve's changes in the cash rates.
A week ago ANZ were offering 7% on a 3 year term deposit. It's now down to 6%.

 

[trainspotter]

With apologies for my ignorance about inter-bank practices, would e.g. our local banks actually be borrowing from any or all of the above banks at those rates? Is money freely available now?

If so, then no wonder deposit rates haven't moved in line with the Reserve's changes in the cash rates.
A week ago ANZ were offering 7% on a 3 year term deposit. It's now down to 6%.

Pretty accurate info there Julia (give or take a few checks and balances on the way through) GFC was all about banks lending money to each other through an open exchange format. "A" bank had a book of mortgages/loans/lines of credit etc. worth "x" dollars ....... they sold it to bank "B" for "y" dollars who was expected to make a profit from it. We all know the rest.

So how it works is if we pick on the bank of Canada for example at .0.25% and we go through a regulatory body who adds on their percentage (world bank for eg.) at 3.5% and underwrites the script to give to another bank who then offloads to you at MARGIN RATE of 7.09% (todays rate at NAB) then someone is making a sheeetload of moola.

 

[trainspotter]

If the Greek financial instability echoes into Europe and Wall Street gets the shudders we may well see a global tightening of credit between banks. Second wave GFC so to speak. Australia will not be immune this time to the constriction of funds.

 

[Julia]

This item from "The World Today" offers a comprehensive (if frightening) summary of the potential fall out from the Greece problems.

http://www.abc.net.au/worldtoday/content/2010/s2891994.htm

One of the economists in particular describes the reasons why this is potentially way worse than the GFC.

 

[Julia]

Before I start trawling through interest rates, does anyone have suggestions for (preferably online) at call rate?
(I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)

 

[drsmith]

(I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)

Are you worried you will sleep too well tonight if you sell the lot ?

For savings I generally use this site for a broad look around.

http://www.infochoice.com.au/banking/savings-account/list.aspx

Note: You may need to uncheck sponsered listings.

 

[Julia]

Are you worried you will sleep too well tonight if you sell the lot ?

Heavens, dr, I will worry whatever I do! Having sold almost everything, there will quite possibly be some good news and I'll wish I'd not had such a focus on capital/profit preservation!

There's just too much global bad news and pessimism for me right now.

For savings I generally use this site for a broad look around.

http://www.infochoice.com.au/banking/savings-account/list.aspx

Note: You may need to uncheck sponsered listings.

Thanks. I only quite recently realised that these "we will find the best rate for you" sites only feature those organisations from whom they are paid a commission. Or at least that's how it works with medical insurance.

 

[drsmith]

Thanks. I only quite recently realised that these "we will find the best rate for you" sites only feature those organisations from whom they are paid a commission. Or at least that's how it works with medical insurance.

I suppose they have to make their money somehow.

I have cash at ANZ at a 1.55% bonus rate to their online saver rate. That was not listed on the above comparison site at the time I found it. I'm not absolutely sure but I don't think it was around for very long.

Some provider's websites have proceed from the infochoice page so I assume these would be the ones (if any) that would trigger a commission if an account was ultimately opened from there.

 

[basilio]

Before I start trawling through interest rates, does anyone have suggestions for (preferably online) at call rate?
(I've sold 99% of my p/f and the 1% remaining will go as soon as they reverse today's upward movement.)

Perhaps gold sovereigns Julia? I can certainly see why you have decided to preserve your capital out of the stock market.

I'm just not sure how "safe" any institution will be if default starts to get out of hand.

My idea of security ? A paid for roof over your head, an energy supply that keeps the house running, a garden that keeps one fed and some good friends for company and support.

Cheers

 

[Julia]

Perhaps gold sovereigns Julia? I can certainly see why you have decided to preserve your capital out of the stock market.

I'm just not sure how "safe" any institution will be if default starts to get out of hand.

My idea of security ? A paid for roof over your head, an energy supply that keeps the house running, a garden that keeps one fed and some good friends for company and support.

Cheers

I like your idea of security, basilio.
Re safety, in Australia the government guarantee on bank deposits is OK for a while (even if our banks weren't amongst the safest in the world), but you're right: it's the fear that governments will start defaulting that is setting the panic levels at present.

Oh, and drsmith, I did sleep pretty well last night!

 

[trainspotter]

I have found Esanda to offer excellent service and rates Julia. (This is not advice and the people responding to this should do their own research)

Unfortunatley they are not online and prefer the old fashioned approach of a phone call and paperwork.

 

[robots]

hello,

http://www.theage.com.au/business/report-forecasts-more-rate-rises-20100509-ulh3.html

oh yeah, this guy got the score on the board or is it for Trash on the Mac?

thankyou
robots

 

[trainspotter]

1) Rates to rise due to inflationary pressures brought about the government borrowing heavily overseas to buy votes.
2) Booming (ALLEGEDLY) commodities sector was the major factor in the last rate rise and RBA is predicting a possible 2 year rise in this faction.
3) House prices have jumped upwards of 15% in some areas in the CITIES.
4) Fuel costs have risen 4.2% and pharmaceuticals up 13% due to consumers no longer being eligible for the government assitance in paying for drugs.
5) Electricity, Water and other household consumables increased by over 10% in some states.
6) Vegetable prices also increased over 10% in supermarkets due to hail storms and inclement weather.
7) RBA is still telling us that interest rates are not at "normal" levels.

These are but a few of the indicators that I believe that interest rates still have a way to go in the upward trend of this cylcle.

 

[drsmith]

Is the budget forecast for inflation of 2.5% a polite request from the government to the RBA not to raise interest rates any further prior to the election ?

On what basis does the government expect inflation to fall ?
Their forecast is below current and the RBA's most recent forecast.

Recent data on inflation confirm that it has declined from its peak in 2008, helped by a noticeable slowing in private-sector labour costs during 2009, the rise in the exchange rate and the earlier period of slower growth in demand. In both underlying and CPI terms, inflation over the most recent 12 months was around 3 per cent. Nonetheless, the extent of decline from here may not be quite as much as earlier forecast and inflation now appears likely to be in the upper half of the target zone over the coming year.

http://www.rba.gov.au/media-releases/2010/mr-10-07.html

The minutes from the RBA's May board meeting will make for interesting reading when available.

http://www.rba.gov.au/publications/rba-board-minutes/index.html

June will be even more facinating.

 

[drsmith]

More on the government's inflation forecast.

Underlying inflation is expected to stabilise at around 2 ½ per cent through 2010‑11 and 2011‑12. Headline inflation is expected to be 3 ¼ per cent through the year to the June quarter 2010 and 2 ½ per cent through the year to the June quarter of both 2011 and 2012.

http://www.budget.gov.au/2010-11/content/bp1/html/bp1_bst2-01.htm

 

[joea]

In moving interest rates to control inflation a number of statistics are taken into account.
inflation, gross domestic product - GDP, level of $A, international interest rates i.e. (USA), unemployment, housing starts, car registrations, retail sales, wages, fiscal policy and taxes and competition policy.
These are listed in a trading book by ASX.

Years ago the rates were raised or lowered to control interest rates.

Why is this simple decision now expected to control inflation in a two speed economy?

We have the government eguating "full time jobs" to "part time jobs", taxes and levy's by the government out of control.
And fear about rate rises are push by media every month.
No wonder the public are angry and unsure about investing.

I think the RBA need to wake up and get off their "fat arses" and compile a new equation, to give the Australian's some hope, that their control of the economy is at least an intellectual decision and not just a bl***y guess.

Better still I would be extremely happy if Peter Costello was at the RBA , instead of some "seat warmer" waiting for retirement.

When labor was first in power the rates were lifted. Nobody can convince me that was a sole decision by the RBA. It was a push by the Labor Government. Following that rate rise, there were a number of decreases as we went into recession.

So somebody was not looking out the window.

There has to be a better way. And that is not a simple rate, rise or fall.

Cheers.

 

[ginar]

This is my window into the future re interest rates , at this present moment a rate rise by years end is very high probability with august currently a 50% chance of this occuring .......... fwiw the term deposit rates are heavily influenced by 3 year bond yields , for those in cash the ability to monitor these bonds is very useful in obtaining the best returns

 

[joea]

This is my window into the future re interest rates , at this present moment a rate rise by years end is very high probability with august currently a 50% chance of this occuring .......... fwiw the term deposit rates are heavily influenced by 3 year bond yields , for those in cash the ability to monitor these bonds is very useful in obtaining the best returns

ginar
Actually I cannot open that attachment for some reson.
I cannot see your reason for a rate rise by end of year. I think that is a part of the "fear campaign" by the media. (although i accept that may happen)

Actually the media now talks about gold because of the fear of a "double dip recession".

I expect the decision on June the 7th to be passed on to July.
I also cannot see why a month would make that much difference. They must be sure, because Gillard has eveybody hurting now already.

Swan was talking up our economy, in the next breath he is defending the bad figures.
I just do not think our economy is that good. No doubt it is better than other countrise as Swan keeps telling us. But that is like comparing "bad " to "terrible".

The RBA should not "jump at shadows", or move rates for political reasons such as the decision in 2007. I would not like to see a rate rise, then oil move to $120/barrel.

Cheers