Reserve Bank of Australia lifts rates again
This is the second straight month that the RBA has raised interest rates. From the Sydney Morning Herald:
The Reserve Bank has lifted its key interest rate for a second month in a row as it attempts to keep Australia’s economy on track for sustained growth.
Today’s widely tipped 25-basis-point increase raises the central bank’s cash rate to 3.5 per cent, marking the first back-to-back monthly increase by the RBA board since March last year when rates peaked at 7.25 per cent.
I remember seeing data showing that once central banks start raising rates, they continue to do so for months. They do not raise rates one month, then lower them the next and then reverse course. Does anyone have the data? This makes me suspect that rates are due to go higher globally rather than lower.
If you think this rate increase will lead to a global double dip because of underlying economic weakness, you should expect the yield curve to flatten. Operation Twist anyone?