Interest Rates Wordwide

[wayneL]

Oz inflation outlook from the Daily Reckoning... Implications for interest rates in this country? They're certainly ticking up elsewhere.

http://www.dailyreckoning.com.au/inflation-2/2007/03/19/

Australian Investors Should Accept Higher Inflation As A Medium Term Prospect
Posted by Kris Sayce on Mar 19th, 2007

MELBOURNE AUSTRALIA (Daily Reckoning): Looking at the Friday to Friday performance of the All Ordinaries Index, one could be forgiven for thinking that not much had happened. All that there was to show for the week’s action was a tiny seven point gain.

Between that though, the All Ords had put on a 1% gain first thing on Monday before falling by over 2% on Wednesday, only to see a similar sized gain on Thursday.

Even before the market opened on Thursday morning one could tell that it wasn’t going to be a half-hearted rally. Investors were in, boots and all. Admittedly, much of the false jockeying for position faded as the open neared, but stocks such as BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) still opened at a healthy premium to the previous day’s close.

Before the market opened it looked as though BHP could open at a 10% premium, and Rio at a 7% increase. By the time it all kicked off those overly bullish numbers were reduced somewhat to a 2% and 1% gain respectively with both stocks holding on to these positions throughout the day without gaining much more.

By the end of the day the whole market had picked up many of the pieces from the previous day’s sell-off, with the All Ordinaries gaining by 1.8% and then closing out Friday with a slight fall to take the week’s gain to just 0.1%.

As we intimated last week, much of the action was following market activity in the United States and the whole subprime mortgage debacle. By the end of the week the market had once again turned towards the outlook for the supply, demand and price of commodities.

Added into the mix was the interpretation of comments from Reserve Bank of Australia Assistant Governor Malcolm Edey. He told the Australia-Japan Economic Outlook conference in Sydney on Friday that Australian inflation is “more likely to be too high than too low.”

The surprise is not so much that the RBA have indicated the potential for higher rates of inflation. The surprise is that it takes the RBA to indicate the potential for higher rates of inflation. The other surprise is the apparent unwillingness of investors to recognise higher inflation as a medium term prospect.

The Assistant Governor told the conference that inflation is “still higher than ideal. It implies that inflation is more likely to be too high than too low in the period we can foresee.”

He went on to say, “some of the factors pushing up underlying inflation last year remain in place,” clearly referring to high commodity prices, rising demand and an increase in wages. He continued, “the bank will be giving careful consideration to these developments, along with other incoming data, as it continues to review inflation prospects month by month.”

Not forgetting that the last quarterly inflation figure had inflation running above the top end of its 2-3% target band. Whether the RBA likes it or not, commodity prices are still running at high levels, higher than where they were three years ago despite having fallen from the elevated levels of the middle of last year.

As we have mentioned countless times before, it is reasonable to expect that there will be a lag as rising commodity prices filter through the system. Crude oil remains tied around the USD$60 a barrel mark. Try hedging that exposure for the same price as four years ago, namely USD$30. It can’t be done.

Other commodity prices such as copper and nickel have had similar, if not more impressive, appreciations in price.

Edey commented further by saying, “The economy has moved closer to full capacity, with recent indicators pointing to stronger conditions in the second half of the year.” It looks like there is only one direction for inflation.

Kris Sayce
for The Daily Reckoning Australia

 

[theasxgorilla]

Another .25 at the next meet is certainly on the cards...go AUD!

 

[noirua]

The UK have raised interest rates from 5.25% to 5.5% MLR (Minimum Lending Rate). These have been raised to curb inflation ( they have three rates of inflation as some things are included or excluded, the main rate is 3.1% and another that includes house mortgages is 4.8% ).

UK house prices rose 1.1% in April to an annual 10.9%. Central London prices rose 3.5% in April.

 

[wayneL]

The UK have raised interest rates from 5.25% to 5.5% MLR (Minimum Lending Rate). These have been raised to curb inflation ( they have three rates of inflation as some things are included or excluded, the main rate is 3.1% and another that includes house mortgages is 4.8% ).

UK house prices rose 1.1% in April to an annual 10.9%. Central London prices rose 3.5% in April.

An aneamic response to the inflation monster asserting itself in the UK. They should have raised .5

Re House prices- The figures are skewed by London, which is on fire with Russian (Mafia?) money poring in. The rest of UK is mostly flat to down. FWIW

 

[theasxgorilla]

Swedish interest rates at 3.5%, expected to reach 4.0% by middle of 2008. "Moderately expansionary" is the terminology used by the Dankse Bank analysts.

 

[noirua]

An aneamic response to the inflation monster asserting itself in the UK. They should have raised .5

Re House prices- The figures are skewed by London, which is on fire with Russian (Mafia?) money poring in. The rest of UK is mostly flat to down. FWIW

Hi, Except for Northern Ireland where house prices have risen 56% in the last 12 months and 62% in Belfast.

 

[wayneL]

Hi, Except for Northern Ireland where house prices have risen 56% in the last 12 months and 62% in Belfast.

Yeah NI is berserk.... absolutely Ape doo-doo.

 

[noirua]

China has once again increased their one-year-bench-mark from 6.39% to 6.57% from Saturday next.

 

[Ants]

edit

 

[Ants]

Quote:
Originally Posted by noirua
Hi, Except for Northern Ireland where house prices have risen 56% in the last 12 months and 62% in Belfast.

Yeah NI is berserk.... absolutely Ape doo-doo.

that is amazing, must of been dirt cheap to start with eh?

 

[Uncle Festivus]

Just out of curiosity, which other countries are on the list?

Have a look at Spain, leading the pack DOWN, lot's of UK investors there too.

 

[noirua]

Interest rates and world growth are factors that seem to go together. Are these World growth figure, given in October 2007, still valid after events in 2008. China has forecast growth in 2008 at 8.5% and this is against the IMF figure of 10%.

http://www.imf.org/external/pubs/ft/survey/so/2007/RES1017B.htm

In December it was noted that food prices are rising quickly throughout the World and the demand for biofuels in the main factor. This is forcing many countries to raise interest rates: http://uk.reuters.com/article/reutersEdge/idUKADD75016920071207?sp=true

 

[mullokintyre]

Fresh from being one of the very first countries to stop all covid restrictions, Norway , courtesy of its central bank, has become the first of the G10 nations to increase its base interest rates since the beginning of the Covid pandemic.
From Au News

Norway's central bank raised its benchmark interest rate on Thursday and said it expects to hike again in December, as it joins a short but growing list of nations moving away from emergency-level borrowing costs.

Norges Bank's monetary policy committee raised the sight deposit rate to 0.25% from a record low of zero,
Oeystein Olsen told a news conference. "It's time to start a gradual normalisation of the policy rate."

The monetary policy committee said its forecast for four more hikes by the end of 2022, to a rate of 1.25%, had become even more likely.

Hmmm, does not sound as though the Norges CB thinks inflation is transitionary.
Mick

 

[Craton]

Fresh from being one of the very first countries to stop all covid restrictions, Norway , courtesy of its central bank, has become the first of the G10 nations to increase its base interest rates since the beginning of the Covid pandemic.
From Au News

Hmmm, does not sound as though the Norges CB thinks inflation is transitionary.
Mick

My bold.
So according to the real estate focused GlobeSt.com, transitory inflation has three meanings/assumptions as per:

“Transitory” inflation could mean one of three scenarios:

1. Prices rise and plunge
2. Prices rise and stay where they are
3. Prices rise and continue to rise, but more slowly

Not knowing the Norwegian economic psyche, my guess is that their CB is hedging a 3 way bet with the third scenario backed for the win. Haha, but what would I know?
I'm just a mug punter, lol.

 

[mullokintyre]

Was having a shot at US Fed's Powell suggesting that the 4.5% inflation that has been experienced in the US was only a temporary thing.
he will struggle to get much agreement in the financial world for that one.
Time will tell.
Mick

 

[qldfrog]

My bold.
So according to the real estate focused GlobeSt.com, transitory inflation has three meanings/assumptions as per:



Not knowing the Norwegian economic psyche, my guess is that their CB is hedging a 3 way bet with the third scenario backed for the win. Haha, but what would I know?
I'm just a mug punter, lol.

I doubt Norway is bankrupt so they can afford a strong currency, pay back debt and sell petrol that every one wants and needs but does not want to be seen or invested near

 

[noirua]

Canada’s main stock index moved higher as bullion prices slipped on Thursday in a mild trading day ahead of a public holiday, as investors digest a batch of economic data. The Canadian dollar consolidated earlier gains following the Bank of Canada’s monetary policy meeting when it raised the overnight rate by 0.50% to 1.0%. Financials, industrials, and energy moved higher.

 

[noirua]

 

[divs4ever]

Sooo India has some chance of cooling inflation

just a shame i couldn't get better exposure to India than i have currently

 

[Dona Ferentes]

The Bank of England has followed the US Federal Reserve in leaving its key interest rate unchanged in what was a major surprise.

In doing so the UK central bank’s decision also added substance to the decision the week before from the European Central Bank which pushed up its key market rate and made it clear it was going to now sit and watch what happens.

The Bank of England decision came as a surprise – the vote was 5-4 on the nine person committee in favour of the pause with Governor, Andrew Bailey providing the 5th and decisive vote.

That sees the UK bank leaving its key rate at 5.25% after 14 increases – the Fed rate is a range of 5.25% to 5.50% and the ECB’s rate is 4.0%.

The rate decision followed better than expected inflation data in August that saw the consumer price dipping to 6.7% from 6.8% instead of rising back to 7% as widely predicted.
“There are increasing signs of some impact of tighter monetary policy on the labour market and on momentum in the real economy more generally,” the bank said in a statement.

“The MPC (Monetary Policy Committee) will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation.”

“Inflation is falling and we expect it to fall further this year. That is welcome news,” Bank of England Governor Andrew Bailey said in a video statement.

“Our previous increases in interest rates are working, but let me be clear that inflation is still not where it needs to be, and there is absolutely no room for complacency. We’ll be watching closely to see if further increases are needed, and we will need to keep interest rates high enough for long enough to ensure that we get the job done."