| Interest rate rise No.2 tipped
THE prospect of interest rates jumping to 6.75 per cent in early 2008 increased significantly yesterday following the release of the Reserve Bank of Australia's statement on monetary policy. Even after factoring in last week's interest rate rise, the bank said inflationary pressures in the economy were at the top of its target band. The RBA yesterday lifted its core inflation forecast for December and throughout 2008 from 2.5 per cent to 3 per cent growth -- signalling another rate rise was on the agenda. Economists said it was a clear statement from RBA governor Glenn Stevens that rates may rise but was unlikely this year because of the looming federal election. The RBA statement said: "With the economy growing at a higher-than-average pace, capacity pressures are likely to persist in the near term".
Bets seen on emergency Fed rate cut
Futures markets began betting Friday that the Federal Reserve will institute an emergency interest rate cut this month in the wake of the credit worries that have roiled U.S. markets in recent weeks. The latest reading suggested there is a 24 percent chance that the central bank will lower a key short-term interest rate in August. Markets were not betting on a rate cut in August immediately following the Federal Reserve's policy meeting on Tuesday. .
Howard 'irresponsible' on interest rates
The Federal Opposition is looking to capitalise on predictions of another interest rate rise, after the Reserve Bank of Australia (RBA) said a strong Australian economy continues to put pressure on inflation. A forecast hike in underlying inflation has economists predicting another rate rise. Australians for Affordable Housing spokesman David Imber says the impact would be enormous. "That would be dreadful news," he said. Opposition treasury spokesman Wayne Swan is making the most of it. "It is just yet more evidence of just how irresponsible [Prime Minister] John Howard was when he promised to keep interest rates at record lows," he said. But while Labor's plan to give tax breaks to investors who build cheap rental accommodation is being welcomed by the industry, it is being condemned by federal Treasurer Peter Costello.
The Federal Reserve keeps interest rates on hold at 5.25%
FXstreet.com (Barcelona) – The Federal Reserve's Monetary Policy Committee has decided to maintain interest rates unchanged at 5.25% after their monthly monetary policy meeting.The decision has been taken in a context of moderate economic growth, according to the Federal Reserve's statement, with volatile financial markets and tighter credit conditions for households and businesses. Nevertheless, according to the Fed the economy seems to be expanding at a moderate pace over the coming quarters, supported by growth on incomes and employment.The odds are now in favour of a rate cut before the end of the year pressed by the economic slowdown U.S. economy is going through, specially notorious in the housing market and mortgage sector. On the other hand, higher than desirable inflation keeps the Federal Reserve´s aim off the temptation of a too fast rate cut, although readings on core inflation seem to have entered a moderation cycle.
Fed's efforts to calm markets not over
The calmer tone in global markets on Monday will encourage Federal Reserve policymakers to believe they are striking the right balance in response to credit market upheavals: stepping up liquidity support aggressively when needed, but holding fire on interest rates. .
Reserve paves way for another rate rise
THE Reserve Bank has revealed a significant deterioration in its outlook for inflation, suggesting the Federal Government might have to defend itself over another interest rate rise before the election. The bank expects underlying inflation to hit 3 per cent - the upper limit of its comfort zone - by the end of the year. It is expected to hover in the top end of the 2 to 3 per cent target band until well into 2009. The bank shrugged off fears that the crisis in the US subprime market would slow global growth, a factor that would argue against further interest rate rises. "At this stage … the evidence continues to point to strong growth in the global economy overall," it said. Economists were surprised by the strength of the bank's outlook and said another interest rate rise - the sixth since the Government promised to keep interest rates low - looked all but certain.
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