FYI | Oct 02 2007
By Greg Peel
Recent reports and presentations from the Reserve Bank of Australia suggest there is little impediment to an interest rate rise should the central bankers feel one is necessary. Certainly the economic data has been leaning that way. The RBA has stated that the election will not affect its decision, and a dismissal of the credit crisis as being realistically a good thing for the economy in the long run would rule out any Fed-style easing. The only concern the RBA may have is over the runaway Aussie dollar, but either way economists do not expect October to be the month for another rate rise. November might be a different story.
It’s definitely a different story over in Europe, where there is little agreement or indication of what might transpire. On Thursday both the Bank of England and European Central Bank make their rate decisions. BoE governor Mervyn King had been stridently against a “bail-out” cut until along came the Northern Rock fiasco. Given the government has now largely taken policy out of the BoE’s hands there is more of a likelihood that Britain will cut. The ECB’s Jean-Claude Trichet is still very much at the helm however, and his rhetoric suggests a rate cut is not his preference at all. It may become a necessity, or indeed some feel the inflation-focussed Trichet may even hike the rate. It’s a bit of a lottery.
Decisions made in Europe will then impact on the US dollar which is currently trading at historical lows. This bothers many in the market, but you wouldn’t know that from the new records on Wall Street.
The US learns September pending home sales tonight along with September vehicle sales. Wednesday brings the ISM non-manufacturing index and August factory orders. On Thursday the jobless claims number is released ahead of the more comprehensive September employment data on Friday. August consumer credit is also released on Friday. Is the US heading into recession? Friday’s numbers may provide some more clues.
In Australia we learn the RBA rate decision on Wednesday along with August trade and retail sales. August building approvals follow on Thursday. On Thursday night we learn the European rate decisions.
