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Interest Rates, Local interest rate discussions
nipper
post Posted: Yesterday, 09:00 AM
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QUOTE
The Reserve Bank says the next move in interest rates is up. Yet investors are starting to embrace the idea that policy makers will be forced to cut.

That leaves the Australian dollar vulnerable, with predictions it could fall as low as 65 US cents.

In the bond market, the yield curve for overnight index swaps -- a gauge of expectations for short-term rates -- has inverted, showing that traders expect the RBA's cash rate to be slightly lower than the current 1.5 per cent in a year's time.

Similarly, the cash-rate futures market is now suggesting about 10 per cent chance of a cut in the second half of next year, and less than 5 per cent for a hike....




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Dec 6 2018, 08:16 PM
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In a major speech tonight that suggested the Reserve Bank was fretting about the potential fallout from an emerging slump in house prices, Deputy Governor Guy Debelle warned a lending slowdown could hurt the economy.

“There is a risk that a reduced appetite to lend will overly curtail borrowing with consequent effects for the Australian economy,” he said.

Noting the Reserve Bank had “repeatedly” said the next move in interest rates was more likely up than down, Dr Debelle said there was “still scope for further reductions in the policy rate“. “It is the level of interest rates that matters and they can still move lower,” he added, in remarks that could foreshadow a sharp reappraisal of the outlook by the Reserve Bank Board when it next meets in February, post summer break.
spinning on a pin



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Nov 6 2018, 01:32 PM
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no change --- 1.5%pa
QUOTE
The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. Taking account of the available information, the [RBA] Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
early birds
post Posted: Jul 4 2018, 10:08 AM
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In Reply To: nipper's post @ Jul 3 2018, 10:47 PM

No change from the Reserve Bank at its July meeting with the cash rate remaining on hold at 1.50% and likely to do so for the next year at least, if current economic trends continue, particularly weak wage growth.

Wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time,” Governor Phil Lowe said in his post meeting statement.

“Consistent with this, the rate of wages growth appears to have troughed and there are increasing reports of skills shortages in some areas.

"Inflation is low and is likely to remain so for some time, reflecting low growth in labour costs and strong competition in retailing. A gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.”

"The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,“ Dr Low said.

So no need to lift interest rates, as some sections of the media and the economic commintariat have been urging.

The AMP’s chief economist, Dr Shane Oliver, who has been a ‘dove’ on monetary policy made the point that he saw “nothing in the RBA’s latest Statement to suggest an imminent change in monetary policy."

“While a brightening outlook for mining investment, strengthening non-mining investment, booming infrastructure spending and strong growth in export volumes argue against a rate cut, topping dwelling investment, uncertainty around the consumer, continuing weak wages growth and inflation, falling home prices in Sydney and Melbourne, tightening bank lending standards and the threat to global growth from a US driven trade war all argue against a hike.

"So it makes sense for the RBA to remain on hold.

"We remain of the view that an RBA rate hike is unlikely before 2020 at the earliest. And given the weakness in home prices and the negative wealth effect that will flow from that its premature to rule out the next move in official rates being a cut, he added.

He and some other analysts have noted that money market rates have risen, mainly due to the rise in US rates for our banks borrowing in US dollars. That is forcing some banks to lift some mortgage rates. Dr Oliver says that’s a concern.

“The RBA also appears to be a little more perplexed by the rise in money market rates seen in recent months seeing at as driven by “other factors” than just the US and unclear as to how long it will persist.

“The problem is that it is resulting in higher mortgage rates for some borrowers (with the big banks likely to move too) at a time when the property market is already weak and its harder to get a loan.

“If the rise in money market funding rates proves to be structural (due to say regulatory changes) then its another reason for the RBA to be cautious in raising interest rates and would point to the need for easier RBA policy over time than would otherwise be the case."
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i reckon if AUD keeps current rate and even drifting lower from here then inflation will be up-------if RBA not "cooking the states" of course.




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nipper
post Posted: Jul 3 2018, 10:47 PM
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Reserve Bank has extended holding interest rates at the emergency low of 1.5 per cent for a record 21st meeting.

The RBA has not changed its setting since August 2016 when the cash rate was cut to its current record low.

The decision was entirely in keeping with expectations which have seen market forecasts of a rate hike pushed further into the future....
... 2019 ????



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Feb 6 2018, 04:55 PM
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and, incidentally,
QUOTE
The Reserve Bank of Australia has left interest rates unchanged at a record low of 1.5 per cent. The widely-expected decision comes after mixed signals on the domestic economy over recent weeks.

Business confidence and conditions remained solid along with employment growth but inflation stayed below target, unemployment rose from a five-year low, retail sales dived after a surprising jump, building approvals fell sharply and home prices in Sydney and Melbourne dipped.

At the same time, manufacturing data and other economic indicators in the US, China and Europe have mostly beaten expectations. Commodity prices have generally been strong along with the Australian dollar and the sharemarket, but they have suffered from global risk aversion in the past week following a rise in global bond yields and expectations of faster US interest rate hikes.

The RBA has left monetary policy on hold since cutting the benchmark rate to 1.5 per cent in August 2016




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 


nipper
post Posted: Dec 9 2017, 07:33 AM
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In Reply To: triage's post @ Dec 9 2017, 07:07 AM

hi triage

James Kirby; Market outlook for 2018 bright, but risks still lurk http://www.theaustralian.com.au/business/w...abe68bfdf967773

you raise a lot of questions. I think he is opining along the Standard Narrative, which usually allows the writer some wriggle room.

(As an importer of capital, the nation needs to be an attractive destination for these flows, and the argument can take the lines as portrayed. Some of the flow-on assumptions are coincidental, rather than correlative - let alone causative - I agree)








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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: triage  early birds  
 
triage
post Posted: Dec 9 2017, 07:07 AM
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In Reply To: nipper's post @ Dec 9 2017, 05:46 AM

Why would this interest rate inversion put pressure on the the Reserve Bank to put up official interest rates? Clearly the AUD is holding its own in the mid 70's. Given how uncompetitive Australian manufacturing has become and how distorted our economy has become, we really are a land of holes and houses, we could probably do with a prolonged period when the Aussie was in the 60's or even 50's.

And just for some perspective 17 years ago the Aussie was bumping along in the low 50's.

And yes Australian banks are highly relient on offshore borrowing but the interest rates they are charged are set independently on what government bonds are paying.

Also I totally reject that Australia is currently cursed with a "weakness in house prices". Bloody hell, historically and relative to other markets Australia has pathologically strong house prices. The whole system needs a good dose of epsom salts to rebalance the amount of lending going into the housing market and that going into business.

Out of interest nip, who wrote that piece?



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"The market can stay irrational longer than you can stay solvent." John Maynard Keynes

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought." Rudiger Dornbush

Mozart fixes everything and Messi is a dog
 
nipper
post Posted: Dec 9 2017, 05:46 AM
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Inside the bond markets a hugely significant event may have been underplayed in recent days: Australian two-year government bonds now pay less than US bonds for the first time in 17 years.

Put simply, this puts pressure on the RBA to lift rates even if the economy remains ridden with pockets of weakness, especially softer residential property prices and low consumer spending.

A lift in Australian official interest rates that does not correspond with wage growth would deepen the weakness in house prices, extend the malaise in consumer spending and further depress the retail sector already feeling the heat of the arrival of Amazon




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Nov 7 2017, 04:04 PM
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In Reply To: early birds's post @ Sep 6 2017, 10:58 AM

Meantime, we saw "the race that stops a nation" thinking about other matters; this first Tuesday of every month had the RBA leave monetary policy on hold (as they have since August 2016); the widely expected decision comes after mixed signals on the domestic economy in recent weeks.
QUOTE
Retail sales and consumer price data disappointed, but surveys of consumer and business confidence improved and employment and international trade data exceeded expectations.

At the same time, US economic growth and manufacturing data have beaten expectations, the IMF revised up its global economic growth forecast, the Australian dollar has fallen 2 per cent, crude oil has jumped 14 per cent, copper is up 7 per cent and nickel has surged 25 per cent.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
 


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