Well, in case you had not noticed this is a rather big week in the markets so allow me to jump the bandwagon of market participants in dire need of some action after past’s weeks calm before the tempest. I will consequently be featuring Alpha.Sources’ first insta-blogging event which will take place in this post. Of course, I am rather busy this week too so I am not sure how much live blogging I will actually do, but do stay tuned anyway … I might surprise you.
Speaking of surprises, the RBA initiated the central bank action by saying ‘f’ck off, we can take it’ to all actual and soon-to-be QE wielding central banks out there.
The Reserve Bank of Australia unexpectedly increased its benchmark interest rate on concern stronger growth will cause inflation to accelerate, driving the nation’s currency toward parity with the U.S. dollar. Governor Glenn Stevens raised the overnight cash rate target a quarter point to 4.75 percent in Sydney, saying the economy has “relatively modest amounts of spare capacity” and citing risk of “inflation rising again over the medium term.” It was the RBA’s first move in six months.
The move signals Stevens wants to avoid a repeat of 2007, when he held off raising rates for months as slowing inflation masked a buildup in price pressures. Growth in Australia, which skirted a recession during the crisis, may strengthen as energy companies such as BG Group Plc add construction jobs.
Now, on the basis of the economic dynamics in Australia I can see why this makes sense but in a global economy where the Fed, the Boj and soon, I think, the ECB are in full QE mode it takes a brave soul to go the other way and actually offer yield for all that leveraged carry that is about to flow Stevens’ way.