Before the Interest Rate Rise

Submitted by Craig Strzelecki on 7 May, 2006 - 23:39

Here’s an audio interview by Ross Gittins, an economics editor at the Sydney Morning Herald (SMH), that was published a day before the rate rise. Here’s an article also from SMH. In the article it notes that the Australian dollar was at its highest in seven months having gained 7.4 per cent against the US dollar since March 27. It also noted that, "Higher interest rates encourage the purchase of bonds, increasing the volume of money lured to a country's currency and, thus, the currency's exchange rate."

Also there were hints of a rate rise since yields of futures were lifted based on the September 90-day bank bills to 5.795 per cent, from 5.57 per cent on March 27. The futures contracts for the bonds act as a leading indicator of interest rate expectations. The contracts settle at a rate that averages 15 basis points above the RBA's cash rate, so yields about 5.9 per cent predict a cash rate of 5.75 per cent - a 25 basis point increase to the present rate.