Us Reserve Bank Cuts Rates

[bart]

Basicially thr american economy is about to/on verge of a recession, and the only way that the US reserve thinks it can stop it is by decreasing rates, which encourages ppl to borrow more, therefore spend more, leading to increased economic activity and therefore higher employment etc, hopefully heading off a recession.

In Australia it is a different story entirely, the australian economy has had more than a decade of economic growth, and now has an inflation problem, and if inflation is not controlled we will all end up paying 5 dollars a loaf of bread, an 5 dollars a litre of milk, not good. Think of it as if rates were 1% everyone would borrow, buy investement houses, stocks, that plasma tv you can now afford and that R-spec phoon you wanteed, but at 8% you are not, you are more likely to put your money in the bank earn the interest and save it for a rainy day. This is exactly what the AUS reserve is trying to acheive at the moment and is why there is a large possiblilty of another rate rise in Feb/March.

But worst thing is this, the goverentment promised all the F*#king tax cuts, which is going to further fuel inflation, leading to another rate rise, so that tax cut we all get goes straight to lending instutions, crap isant it, why dont they just give it to hosppitals, roads, schools, because they wanted to win the election. Thanx for listening to my rant been brewing for a while lol

[SCRIBR]

here here

[TUFXRT6]

From my point of view the key to the 75 basis point reduction is two things:

1) It was an extra ordinary meeting which basically means the Fed believe the US economy is stuffed & couldnt wait.

2) The Fed stated that they would still look at reducing the official interest rate when they meet on the 31st of Jan.

Most economists are suggest another 50 point movement next week, which would mean the Fed has cut 125 basis points in two weeks.

The Reserve bank on the other hand has more than enough ammunition to raise official rates in Feb.

Reason 1) Even though employment is a lagging indicator the numbers are still at the best they can be.

Reason 2) the Trimmed Mean CPI number was released today & was higher than market expected for a year on year at 3.4%. This is well above the RBA target of 3%.

Even though I have given good reason for a rate rise I dont believe the RBA will raise rates in Feb due to the fact the RBA cant ignore the fact the US is in serious trouble & would put the Australian economy at serious risk of stalling or even worse starting to follow the US lead.

I do believe though that we may still have one more rate rise this year.

My two cents rounded up to five.

Regards

TUFXRT6

[SCRIBR]

Even though I have given good reason for a rate rise I dont believe the RBA will raise rates in Feb due to the fact the RBA cant ignore the fact the US is in serious trouble & would put the Australian economy at serious risk of stalling or even worse starting to follow the US lead.

That's a good point. Didn't think of it that way.

[nang3]

Australias economy is booming so the reserve bank decides to reign it in by making mortgages more expensive for everyone...

This really pisses me off because Im not earning $1 more while the economy is rocketing along, fuel is going up, supermarket items are going up, everything is going up because of the price of fuel basically.

Now I have to pay an extra chunk of cash each month towards my home loan like everyone else because of a higher interest rate, which will dampen inflation but its hardly going to reduce the cost of everything to offset the extra interest payable..

I understand the basic principles behind economic policy decisions from when I studied it at uni, but its still farken annoying to be forking out more cash to the bank while everythign else has increased too, except wages.

[TUFXRT6]

I dont want to be rude nang3 but you will find that statistically more people are employed and wages have continued grow due to the availability of jobs & lack of skilled workers.

Regards

TUFXRT6

[jetute]

The last few words sum it up; interest rates are going up here to slow down spending. Over there they're trying to kick-start the economy and encourage spending to try and avoid recession by stimulating the economy.

and at the end of the day it only hurts average joe........... so we feel the pain!! the kents should come and spend a week in my shoes and see what rate rises feel like. mortgage to pay, kids to feed, school costs, business to run etc etc

all good to talk about cutting down spending etc to avoid inflation... but who does it hit in the hip pocket??

Edited 23/01/08 07:42 AM by jetute

[tab]

Exactly

I dont want to be rude nang3 but you will find that statistically more people are employed and wages have continued grow due to the availability of jobs & lack of skilled workers.

Regards

TUFXRT6

Yes on average across the entire economy. But Nang's point was that regardless of what is happening to the entire economy he's still getting paid the same yet forking out more coin to receive the same back in goods and services.

Most of the workforce is in the same boat (myself included), only those involved in the "resources boom" are getting a higher wage in line with their higher expenditure. That's where the economic policy of setting interest rates is flawed, it drives an exponential gap. It costs more for everyone to live but only a smaller percentage get the higher income to go with it.

There's not really a feasible alternative but it's still worthy of a whinge and moan

[SCRIBR]

it's done to help you though. So you don't have to earn $10 million bucks a year to pay $14,000 for a big mac meal... Like has happened in a lot of countries

[tab]

I know....hence the last line. Why can't you just let me vent?