Bonds/Interest Rates

The RBA is expected to leave rates unchanged on Wednesday but it’s still uncertain what the ECB and BoE will do with rates on Thursday.

The Dow closed off the quarter with a small down day.

Inflation in Australia remains at the top end of the RBA’s target zone of 2-3%, the monthly gauge by TD Securities and the Melbourne Institute suggests.

The Dow ratcheted up another 100 points last night driven largely by GM. Bear Stearns rumours also fuelled the fire along with a very poor durable goods number.

A slew of poor economic data and profit reports sent the Dow off into negative territory last night, before everybody remembered the Fed was standing ready.

The only way seems down for US interest rates and thus also for the greenback. SVB’s senior strategist Dave Bhagat agrees, but only for the medium term.

If we need an interest rate rise this year we’ll have one. That seems to be the message from a dismissive RBA financial stability report.

Stephen Koukoulas at TD Securities suggests there is little chance of the US sliding into recession, so any rate cut cycle in coming months should be moderate as growth may surprise on the upside.

The Dow had added 53 points on the close to finish a tumultuous week up 2.8%.

A once stoic BoE has bowed to Gordon Brown as a result of Northern Rock, while Governor King is burnt at the stake.