RBA hikes rates to 3.25%-Good times are back?

Well, well, well, hasn’t it been a long time since there has been any positive news releases, well at least that of a monumental impact? Yes it has and it has come from our good ‘ol neighbour down under. Yes, while we have been thinking that the “leading powers”, definition of that term these days requires a whole new discussion altogether, such as the UK and US might lead the market with such market moving decision, it has been Australia that has led the pack in doing making this unexpected move.

The Reserve Bank Of Australia(RBA), has increased its interest rates by 25 basis points from 3 to 3.25%. Now this might not sound that great over normal market conditions, say over the last few years, before our great financial crisis last year. However, since then, to watch inflation rates with fiscal intervention, the central banks and most governments have been on a desperate rate cutting exercise. As you would know, the Fed has cut US dollar rate to almost zero level, with no more room to cut their interest rates any further.

Only the Eur, Kiwi and Aussie have been having pretty decent interest rates so far. Over more than half a year of “hold” policy with almost all the countries throughout the world, this has been the first time that any economy has been bold enough to increase its interest rates as yet.

“With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy,” RBA governor Glenn Stevens said in a statement.

Therefore, this hike in interest rate could signal intent to the rest of the world that the Australian economy is doing well, very well relative to the rest of the various economies. Also, this may signal the entire market to shrug itself off its recession hoodoos and accelerate risk taking with natural gains for all markets.

What do you think? Has the market recovered or is this just a one sided recovery of a market which is overall still in recession?

Happy trading,
Seeni

Bookmark It

Hide Sites