Tuesday, November 3, 2009

Reserve Bank of Australia raises rates again!

Australia's Central Bank repeated its October 2009 comment when it raised rates for a second time by 25 basis points to 3.5%; saying that it is -

"'prudent to lessen gradually the degree of monetary stimulus.'"

Here's a chart of Interest rates before today's hike:

Let's take another look at the Central Bank's comment:

"'prudent to lessen gradually the degree of monetary stimulus.'"

Are these guys worried about Inflation, Deflation, Stagflation, Asset bubbles or just ADDICTION to monetary stimulus ?

While I do think that rollback of stimulus packages is impossible ( imagine how the stock markets would react!), longer term this free lunch policy is going to cause more imbalances and instability.

Can the Central Banks really start hiking rates aggressively when the 'real economy' is still struggling? - NO

Can rates go up drastically when governments have so much more borrowing to do? -NO

As Marc Faber famously said -its time for Central Bankers to shut the 'Bar' down -its way past last orders anyway!

........only question is........just how are they going to do it??

No comments: