| Keep politicians away from the production line
WHILE most commentators have welcomed the Reserve Bank's inflation-dampening interest rate rise, interest payments are part of the direct expenses of doing business. Hence the latest move will bring additional costs of debt servicing for industry. In addition, higher interest rates will probably further strengthen the Australian dollar. Increased debt servicing costs and a stronger dollar put particular pressure on the trade-exposed activities involved in export markets and in competing with imports. Trade-exposed industries now have to find cost savings to retain their competitiveness. Victorian companies and jobs are more vulnerable to general cost increases than those in other states, because of the state's prominent manufacturing base and its strengths in exporting educational services.
The nitwit sector
Last time I dared to look, the financial sector of our economy accounted for about 20 percent of all market value. At the end of June, for instance, financial services accounted for that much of both the S&P 500 index and the broader Russell 3000 index. Either way, financial services are a hefty chunk of the market pie. .
U.S. Federal Reserve leaves rate steady; no sign of future cut
The Federal Reserve Tuesday largely sidestepped the growing anxiety over how tightening credit standards will affect the economy, deciding to leave its benchmark interest rate unchanged at 5.25 percent. More important than the decision to hold rates steady — which was widely expected — the Fed did not significantly adjust the language in its statement explaining the decision. Many on Wall Street expected the recent tumult in credit markets to prompt the Federal Open Market Committee to shift its focus from vigilance against inflation to the possibility of an economic downturn. Such a move would open the door for the Fed to lower interest rates in the future — something many investors have been hoping for since the Fed stopped raising rates last summer. Although it acknowledged the recent problems, its central message was unchanged.
Fed's efforts to calm markets are far from over
The bright start to trading on Monday will encourage Federal Reserve policymakers to believe they have struck the right balance in response to credit market turmoil: stepping up liquidity support aggressively when the interbank market came under strain at the end of last week, but offering no signal that they are yet resolved it will be necessary to cut interest rates. .
Transcript of a Press Briefing on the Release of the Updates to the April 2007 World Economic Outlook and the Global ...
Jaime Caruana, Counsellor and Director of the Monetary and Capital Markets Department Charles Collyns, Deputy Director, Research Department Olga Stankova, Senior External Relations Officer, External Relations Department Washington, D.C. Wednesday, July 25, 2007 .
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