This morning, Australia raised their benchmark interest rate from 3% to 3.25%.
Glenn Stevens, Australia’s Ben Bernanke, stated that it was time to raise rates as the worst is over for the country. In our August 17, 2009 post An Interesting Weekend of Sports and How it Relates to World Capital Markets we mentioned how interdependent the world has become. This morning much of the tone in world capital markets will be set from Autralia’s, a G20 nation’s, move.
An increase in interest rates represents a signal that stimulus is less needed and the country is looking towards a recovery, in our opinion.
What are the repercussions of the move?
- Positive economic expectations from Australia
- Higher Australia currency price
- Lower other related currency prices
- Pressure on neighboring countries to do the same (rasie rates)
We believe it will still be some time before our government raises rates, but it is good news to see our across the pond neighbors shaking the world wide recession cold.