Australia unexpectedly raises interest rates By Allen Wan
TOKYO (CBS.MW) -- Australia became the first of the major Western economies to raise interest rates this year due to booming growth as the Reserve Bank of Australia unexpectedly increased the cash rate by a quarter point to 5 percent on Wednesday. The RBA cited several reasons for the move -- strong domestic demand, unexpected strength in the nonfarm economy, a firming labor market and most notably, a housing boom. "The housing market continues to be buoyant. The effect of the rise in house prices over recent years is likely to be expansionary for the economy in the period ahead, as higher wealth is accessed to support household spending," RBA governor Ian MacFarlane said in a statement. "In the short term, these developments are unlikely to make for significant problems on CPI inflation." A strong economy has been reflected in the Australian dollar, which rose as high as 71.16 on Wednesday, marking 6-year highs against the U.S. dollar. Australia's All Ordinaries Index slid 1 percent to 3,246.
Looks like 2004 could be similar to 1994, in that the Federal Reserve of the United States will have to start raising short term interest rates! The short term pain associated with rising rates will be felt by the equity markets World wide. However, just as then, sometime in 2004, great opportunities will occur on the short and then on the long side!
Good Luck to All.
TOKYO (CBS.MW) -- Australia became the first of the major Western economies to raise interest rates this year due to booming growth as the Reserve Bank of Australia unexpectedly increased the cash rate by a quarter point to 5 percent on Wednesday. The RBA cited several reasons for the move -- strong domestic demand, unexpected strength in the nonfarm economy, a firming labor market and most notably, a housing boom. "The housing market continues to be buoyant. The effect of the rise in house prices over recent years is likely to be expansionary for the economy in the period ahead, as higher wealth is accessed to support household spending," RBA governor Ian MacFarlane said in a statement. "In the short term, these developments are unlikely to make for significant problems on CPI inflation." A strong economy has been reflected in the Australian dollar, which rose as high as 71.16 on Wednesday, marking 6-year highs against the U.S. dollar. Australia's All Ordinaries Index slid 1 percent to 3,246.
Looks like 2004 could be similar to 1994, in that the Federal Reserve of the United States will have to start raising short term interest rates! The short term pain associated with rising rates will be felt by the equity markets World wide. However, just as then, sometime in 2004, great opportunities will occur on the short and then on the long side!
Good Luck to All.
