Interest Rates/Aust economy discussion
Posted: Tue Oct 06, 2009 4:10 pm
As expected interest rates go up by 25 points.
from adelaidenow
UPDATED: THE Reserve Bank has squeezed the economic brake with a cash rate rise of 25 basis points to 3.25 per cent.
This marks the first time since April that the central bank has increased its rate.
The market had priced in better-than-even odds that the rate would be increased today after strong ANZ job ads figures were released yesterday.
A 25 basis point increase to the official rate adds about $45 a month to a $300,000, 25-year home, according to comparison website RateCity.
Australia is now the second country in the world, after Israel, to begin tightening its monetary policy.
Reserve Bank Governor Glenn Stevens has called Australia's 3 per cent official cash rate an "emergency" level rate.
This is likely to be the first of many increases that the Reserve Bank will make as the economy continues to recover.
One leading economist is predicting that the official cash rate is likely to rise to four or 4.5 per cent by the end of next year.
The global financial crisis was "almost if not completely over"', and most parts of the economy no longer needed the support of very low interest rates, Grattan Institute economist Saul Eslake said earlier today.
If rates were left too low for too long, it could fuel a bubble in housing prices, he told ABC News
RBA says time to lessen stimulusArticle from: Font size: Decrease Increase Email article: Email Print article: Print Submit comment: Submit comment MEREDITH BOOTH
October 06, 2009 01:30pm
THE Reserve Bank has lifted the official cash rate 25 basis points to 3.25 per cent with governor Glenn Stevens confident of economic recovery.
In his statement for the RBA Board's decision today, Mr Stevens said forecasts for economic recover were being revised higher.
He said the RBA Board’s view was that it is was now "prudent to begin gradually lessening the stimulus provided by monetary policy. ''
"This will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead. ''
Looking to Australia's economy, Mr Stevens said: "prospects for Australia’s Asian trading partners appear to be noticeably better. Growth in China has been very strong, which is having a significant impact on other economies in the region and in commodity markets''.
"Economic conditions in Australia have been stronger than expected and measures of confidence have recovered.
"Unemployment has not risen as far as had been expected. The weaker demand for labour over the past year or so nonetheless has seen a moderation in labour costs. Helped by this and the earlier fall in energy and commodity prices, inflation has been declining, though measures of underlying inflation remained higher than the target on the latest reading. Underlying inflation should continue to moderate in the near term, but now will probably not fall as far as earlier thought,'' he said.
He said interest rates for home borrowers on fixed-rate loans had already risen as markets anticipated a higher level of the cash rate.
"In late 2008 and early 2009, the cash rate was lowered quickly, to a very low level, in expectation of very weak economic conditions and a recognition that considerable downside risks existed.
"That basis for such a low interest rate setting has now passed, however. With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed,'' he said.
He said the RBA Board’s view was that it is was now "prudent to begin gradually lessening the stimulus provided by monetary policy. ''
from adelaidenow
UPDATED: THE Reserve Bank has squeezed the economic brake with a cash rate rise of 25 basis points to 3.25 per cent.
This marks the first time since April that the central bank has increased its rate.
The market had priced in better-than-even odds that the rate would be increased today after strong ANZ job ads figures were released yesterday.
A 25 basis point increase to the official rate adds about $45 a month to a $300,000, 25-year home, according to comparison website RateCity.
Australia is now the second country in the world, after Israel, to begin tightening its monetary policy.
Reserve Bank Governor Glenn Stevens has called Australia's 3 per cent official cash rate an "emergency" level rate.
This is likely to be the first of many increases that the Reserve Bank will make as the economy continues to recover.
One leading economist is predicting that the official cash rate is likely to rise to four or 4.5 per cent by the end of next year.
The global financial crisis was "almost if not completely over"', and most parts of the economy no longer needed the support of very low interest rates, Grattan Institute economist Saul Eslake said earlier today.
If rates were left too low for too long, it could fuel a bubble in housing prices, he told ABC News
RBA says time to lessen stimulusArticle from: Font size: Decrease Increase Email article: Email Print article: Print Submit comment: Submit comment MEREDITH BOOTH
October 06, 2009 01:30pm
THE Reserve Bank has lifted the official cash rate 25 basis points to 3.25 per cent with governor Glenn Stevens confident of economic recovery.
In his statement for the RBA Board's decision today, Mr Stevens said forecasts for economic recover were being revised higher.
He said the RBA Board’s view was that it is was now "prudent to begin gradually lessening the stimulus provided by monetary policy. ''
"This will work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead. ''
Looking to Australia's economy, Mr Stevens said: "prospects for Australia’s Asian trading partners appear to be noticeably better. Growth in China has been very strong, which is having a significant impact on other economies in the region and in commodity markets''.
"Economic conditions in Australia have been stronger than expected and measures of confidence have recovered.
"Unemployment has not risen as far as had been expected. The weaker demand for labour over the past year or so nonetheless has seen a moderation in labour costs. Helped by this and the earlier fall in energy and commodity prices, inflation has been declining, though measures of underlying inflation remained higher than the target on the latest reading. Underlying inflation should continue to moderate in the near term, but now will probably not fall as far as earlier thought,'' he said.
He said interest rates for home borrowers on fixed-rate loans had already risen as markets anticipated a higher level of the cash rate.
"In late 2008 and early 2009, the cash rate was lowered quickly, to a very low level, in expectation of very weak economic conditions and a recognition that considerable downside risks existed.
"That basis for such a low interest rate setting has now passed, however. With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed,'' he said.
He said the RBA Board’s view was that it is was now "prudent to begin gradually lessening the stimulus provided by monetary policy. ''