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RBA Rises Policy Rate By 0.25% Bps To 4.75%, With Consensus Calling For Unchanged, AUD Surges Across The Board, Futures Follow
The Reserve Bank of Australia has raised rates to 4.75%, more than the consensus expected, and the result is a surge in all AUD, crosses, especially the critical AUDJPY which is the primary recipient of the USD funding largese, and is the primary correlation to the ES, meaning futures are likely to follow suit, especially since there will be no monetary tightening in the dollar in this lifetime under the current Fed syndicate. It appears the RBA has bought the decoupling theory hook, line and sinker, and with China refusing to combat inflationary forces domestically, it is up to its derivative economies (AUD, BRL, etc) to do so. Nonetheless, one must respect the RBA's concern about what inflation may do to its economy: "the economy is now subject to a large expansionary shock from the high terms of trade
and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent
good results on inflation, the risk of inflation rising again over the medium term remains. At
today's meeting, the Board concluded that the balance of risks had shifted to the point
where an early, modest tightening of monetary policy was prudent."
The result: whooooosh.
At its meeting today, the Board decided to raise the
cash rate by 25 basis points to 4.75 per cent, effective 3 November 2010.
The global economy grew faster than trend over the
year to mid 2010. Global growth will probably ease back to about trend pace
over the coming year as strong recoveries in the emerging world give way to a more
sustainable pace of expansion and growth remains subdued in the United States and
Europe. At the same time, concerns about the possibility of a larger than
expected slowing in Chinese growth have lessened recently and most commodity prices
have firmed, after a fall earlier in the year. The prices most important to
Australia remain at very high levels, with the result that the terms of trade are
at their highest since the early 1950s. The turmoil in financial markets earlier
in the year has abated, though sentiment remains fragile.
Information on the Australian economy indicates growth
around trend over the past year. Public spending was prominent in driving
aggregate demand for several quarters but this impact is now lessening. While there
has been a degree of caution in private spending behaviour thus far, the rise in
the terms of trade, which is now boosting national income very substantially, is
likely to lead to stronger private spending over the next couple of years, especially
in business investment.
Asset values are not moving notably in either direction,
and overall credit growth remains quite subdued at this stage notwithstanding evidence
of some greater willingness to lend. The exchange rate has risen significantly
this year, reflecting the high level of commodity prices and the respective outlooks
for monetary policy in Australia and the major countries. This will assist,
at the margin, in containing pressure on inflation.
The demand for labour has continued to firm. While the labour market is not
as tight as in 2007 and 2008, some further strengthening would appear to be in prospect,
judging by the trends in job vacancies. After the significant decline last
year, growth in wages has picked up somewhat, as had been expected. Some further
increase is likely over the coming year.
Given these conditions, the moderation in inflation
that has been under way for the past two years is probably now
close to ending. Recent
information suggests underlying inflation running at about
2½ per cent,
with the CPI inflation rate a little higher due mainly to
increases in tobacco taxes. Both results were helped somewhat
in the latest quarter by unusual softness in food prices.
Inflation is likely
to rise over the next few years. This outlook, which is
largely unchanged from
the Bank's earlier forecasts, assumes some tightening in
monetary policy.
For some time, the Board has held the stance of monetary
policy steady, which has resulted in interest rates to borrowers being close to
their average of the past decade. This allowed some time to observe the early
effects of previous policy changes and to monitor the uncertain global outlook. The
Board is also cognisant of differences in the degree of economic strength by industry
and by region.
However, the economy is now subject to a large expansionary shock from the high terms of trade
and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent
good results on inflation, the risk of inflation rising again over the medium term remains. At
today's meeting, the Board concluded that the balance of risks had shifted to the point
where an early, modest tightening of monetary policy was prudent.
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Royal Bank of Australia??? God save the Queen.
first thought on looking at the chart; "I wonder how many Japanese housewives just commited suicide". ref. to the popularity of the fx. market for stay at home housewives.
IQ: We got it the first time re Mrs. Watanabe doing the hara-kiri thing. No need to explain further.
Plus, why are you confessing in your screen name to having such a substandard intelligence level for this particular site?
Game ON!!! Good Move Bretheren! go.. go.. GO..!
central bankers going in diff directions ...
game on indeed
It might be game on, but CB's going in diff directions? Not necessarily. Why? Because the Fed wants a lower dollar, and the RBA is obliging them. Seems like they are working together...no?
The global reserve currency custodians get what they want...with the help of their CB brethren. Isn't that how it's supposed to work? (sarcasm intended here...).
But I hear what you are saying. The price of money as expressed by the maths of interest rates, are moving in the opposite directions between the 2 counties, but that doesn't take away from the fact that they are working together to achieve a currency devaluation goal for the Fed.
In Oz we have everything upside down. We are trying to race to the top! Currency appreciation! Our imports are getting cheaper, right?
Hmmm, another move against market rates, in the opposite direction to last month.
Maybe the RBA no longer cares about appreciation? or maybe they just pick the move randomly out of a hat.
Mind you, not once since Jan '08 has the RBA had to 'reverse repo' to withdraw any liquidity. I don't think raising rates really means jack shit. It certainly doesn't mean they are actually being prudent.
+1
Are Harley-Davidson's any cheaper, Chrysler's, GM , Fender guitars, Rockports, Levis, Caterpillar earthmover's, Apple I sucks. Well that about wraps up the US imports( Actually Fender stratocastor American standards have dropped 30%). Oh!!! the internet is going to cut some retailers Nuts off.
What about National Resonators? I've been hoping for one of them one day.
Personally, I've always wanted me one of these Alembic Basses: http://alembic.stores.yahoo.net/side5.html
There are some good folding knives made in the USA : Chris Reeve, Benchmade and Syderco come to mind. Although, some of the Spydies are made in asia. Buck too, I guess.
All on the back of resource depletion. Should be the Lucky Country for about
1000 years.
risk on launch pad activated. QE ignition imminent. separation in 5 ... 4 ... 3 ...
AUD at near parity now...
Australia also world record total debts...when will it end for them? Good question
Australia also world record total debts...
By what measure?
world record private debt. Near 0 public debt in GDP terms
Yes, I concur with your position that Oz has the world record household debt to disposable income percentage.
Go here: http://www.rba.gov.au/chart-pack/graphical-summary.pdf
Search on the word "household", and you'll eventually come to a chart of household debt to disposable income percentage...
However, "Near 0 public debt in GDP terms"??? C'mon David...are you fucking kidding or what?
Search for the acronym "AOFM" or "Australian Office of Financial Management", and find out how much public debt this mob has been getting Australia into since 2007, and divide that number by 1 trillion A$, and you'll get your Australian Federal public debt to GDP ratio.
Then go and find out how much each of the 8 State & Territory Governments are in debt for, you'll be surprised by the redness of ink running across NSW, and then add that to your AOFM figure and divide the lot by 1 trillion.
After you've done that, tell me if you see zero public debt.
Let's party like it's 2007!
ever heard of a nuclear helicopter? stay tuned
Property speculators (thats just about every one) will be very rattled, especially as the largest bank (Commonwealth) raised it another 20 basis points over and above the RBA's.
Still it was prudent but I would have rather seen the RBA force banks to hold a higher level of Tier 1 capital to lesson the impact on borrowers who have seen repayments increase over 58% on a floating interest rate.
What this does to the Aussie current a/c is a worry, we will be paying the World a wage from our wage
Property will go one way - Timmmmmmmmmber
Lotta household mortgage stress in Oz. Lotta folks think a national house price average of nearly $500,000.00 is perfectly reasonable.......it's different here doncha know!
And with all the leakage getting ready to flood yaz from Ben's insanity you will most likely see even greater gains. Bubbleliciousness fo sho.
And don't forget the spruikers from Westpac and Commonwealth bank who tell us residential Australian property is not in a bubble!
Ring .. aaaannnd they're off
There's a big "EAT THIS" sent to Benron. The Aussies know the stunt we're going to pull.
Every night the US stock index futures rise, well 90% of the time. Buy the close sell the open, get paid while you sleep. The best time to exit your overnight position 2:30am cst.
ipads cost the same godammit
Getting cheaper all the time here. Interestingly gas isn't going down correspondingly. Recently I bought some Ray Charles records in NYC for about $7 a piece. 2 years ago they were twice that. Get on the right track baby !
So much for the little bit of strength we have been seeing in the US Dollar. Such a rigged system, there is nothing free about it.
See how easy it is to lift the stock index futures, offers get pulled and up it goes, like magic. Now SPY will gap open and more than likely we sit in a 3-4 point range for 5 hours. The media will say, stocks tread water as election looms, or something stupid like that.
How's Australia's domestic budget? (Deficits, balanced, or surpluses?)
I like the interest rate move on the face of it.
Will income seekers turn to Australian bonds?
What's the prognosis for their economy?
What's the prognosis for the exchange rate v. the dollar?
Just full of questions this AM. No answers.
Sorry, it's too early.
retailers in aus ..... see ya...internet just smoked you
export margins .... see ya.. bernanke just smoked you
property in aus.......
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