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Ben Kingsley Blog post by Ben Kingsley

RBA Rates Decision – July 2011

Hmmmmm, just how well is the little Aussie Economy going?

As expected the RBA remained in a holding pattern on the cash rate, pushing out their well versed message of “rates remain appropriate”, well for now anyway. Their people still remain hawkish on further interest rate rises as theirs and Treasuries GDP calculations have the economy growing this financial year around the 4% mark.

However recent economic data makes this forecast look a little light on as jobs growth, finance lending, and general sentiment in the market isn’t quite supporting this position. Maybe the RBA know more about what this so called mining boom is going to reap for us, as it’s fair to say without it, we’d be in the same sort of mess that most of the world is struggling to recover from.

Speaking of other countries, Greece is certainly not the flavour of the month and as much as its people rebel against further austerity measures, they are going to sink further into the mire and it’s still unknown just how many other countries will be dragged down with them and what impact this will have on the global growth story.

This brings me to my main question of this opinion piece….Is a rate move down more likely than up? Well looking at the markets that trade on rate movements, now is the closest the markets have looked to potentially pricing in a rate movement down. However, even though it’s trended that way in more recent times, it’s still showing us that a rate rise is more likely than a fall at this moment in time.

Personally, my position hasn’t changed, I was of the belief of another rate rise occurring next, but that would be it for quite a while and it most likely would be the end of this cycle’s upward movement on rates. When am I guessing this would happen? If not in November then it would be unlikely until Feb or March.

Time will reveal if I am right or wrong……..

 

(Those people reading this should be reminded this is an opinion comment, and should not be making decision about financial matters without seeking further clarification and understanding of your own personal circumstances. This article is not advice you should rely upon. I recommend you speak to one of our licensed finance advisors regarding any decision around your personal finances, before taking any action.)

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