Concrete signs of recovery?
The Reserve Bank in Australia yesterday raised the official interest rate by 0.25% to 3.25%, making it the first developed nation to do so. Many are pointing to this as concrete signs of a recovery in the Australian (and global) economy. It certainly is a strong statement by the Reserve Bank, and many are tipping another 0.25% rise when the Reserve Bank meets next month, with more rises set to follow... The official interest rate is at historical lows after falling from 7.25% to 3% in just 7 months and the Reserve Bank has hinted that it wishes to raise rates by up to 2% over the next 12 months.
This, coupled with strong job ads (The ANZ job ads index posted a surge in job ads of 4.1% in August and 4.4% in September). Unfortunately the ANZ also predicts that unemployment has yet to peak and will hit 7.25% by the middle of next year (it is currently 5.8%). So there will be more and more people out of work in the next 9 months, which will not be helped by the increasing costs of mortgage repayments.
The other indicators are mixed, with retail sales up 0.9% and car sales down 3.5% last month.
So, time will tell whether the rate rise was too early or not, but it certainly is a strong statement that the powers to be see the economy starting to heat up and they are using monetary policy to keep inflation under control.
Labels: Global trends
