News

Australia Becomes First Developed Economy to Raise Interest Rates

Australia Becomes First Developed Economy to Raise Interest Rates
Australia Becomes First Developed Economy to Raise Interest Rates
<!-- IMAGE -->

The Reserve Bank of Australia has raised its official interest rate by a quarter of a percentage point. The move makes Australia the first developed economy to raise rates since the global financial crisis began.  But, other central banks are not likely to follow suit just yet.
 
The governors of the Reserve Bank of Australia raised its benchmark interest rate to 3.25 percent, Tuesday, up from three percent. They say, with Australia's economic growth on track and the risk of a serious contraction past, it is time to gradually raise rates from their lowest level in 49 years.

The central bank began cutting rates in September 2008, when they stood at 7.25 percent. At the time, the world was rapidly sinking into a crisis, with banks cutting off lending and several international financial institutions on the verge of collapse.

Governments and central banks around the globe stepped in to rescue banks, cut interest rates and create spending packages to stimulate their economies. Most developed and many developing economies slumped into recession.

Adrian Mowat is an Asia market strategist for the investment bank JP Morgan Chase in Hong Kong.  He says the situation has changed.

"Globally we have interest rates that were set during a period of a crisis and economies are recovering, particularly in Asia and emerging markets, and it isn't necessary to have interest rates as low as they are ... The patient no longer needs extreme medicine and that's a good sign," said Mowat. 

Australia's economy weakened, but did not fall into recession in the past year, because of strong demand from China and other countries for its commodities, such as iron and coal.

Although the global economy is slowly improving, economists and market analysts do not expect interest rates to start rising around the world.  For instance, Chinese officials have indicated they will be slow to raise rates, as have other Asian governments.

Mowat says it will be next year before most countries start raising rates, and later for the largest developed economies.

"Our forecast is that the interest rates in the U.S. will be unchanged throughout 2010, same in the euro area, same in Japan," he said.

The United States, Japan and much of Europe all have interest rates near or below one percent.

Usually, central banks raise interest rates to cool overheated economies and head off the risk of price inflation. But Mowat says the RBA's move was not prompted by inflation concerns.  It was simply the first step toward returning to more historically normal rates.

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Scientists Say Plankton More Important Than Previously Thoughti
X
George Putic
May 26, 2015 9:26 PM
Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video US-led Coalition Gives Some Weapons to Iraqi Troops

In a video released Tuesday from the Iraqi Ministry of Defense, Iraqi forces and U.S.-led coalition troops survey a cache of weapons supplied to help Iraq liberate Mosul from Islamic State group. According to a statement provided with the video, the ministry and the U.S.-led coaltion troops have started ''supplying the 16th army division with medium and light weapons in preparation to liberate Mosul and nearby areas from Da'esh (Arabic acronym for Islamic State group).''
Video

Video Amnesty International: 'Overwhelming Evidence' of War Crimes in Ukraine

Human rights group Amnesty International says there is overwhelming evidence of ongoing war crimes in Ukraine, despite a tentative cease-fire with pro-Russian rebels. Researchers interviewed more than 30 prisoners from both sides of the conflict and all but one said they were tortured. Henry Ridgwell reports for VOA from London.
Video

Video Washington Parade Honors Those Killed Serving in US Military

Every year, on the last Monday in the month of May, millions of Americans honor the memories of those killed while serving in the armed forces. Memorial Day is a tradition that dates back to the 19th Century. While many people celebrate the federal holiday with a barbecue and a day off from work, for those who’ve served in the military, it’s a special day to remember those who made the ultimate sacrifice. Arash Arabasadi reports for VOA from Washington.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Rolling Thunder Run Reveals Changed Attitudes Towards Vietnam War

For many US war veterans, the Memorial Day holiday is an opportunity to look back at a divisive conflict in the nation’s history and to remember those who did not make it home.
Video

Video Female American Soldiers: Healing Through Filmmaking

According to the United States Defense Department, there are more than 200-thousand women serving in the U.S. Armed Forces.  Like their male counterparts, females have experiences that can be very traumatic.  VOA's Bernard Shusman tells us about a program that is helping some American women in the military heal through filmmaking.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.
Video

Video On Film: How Dance Defies Iran's Political Oppression

'Desert Dancer' by filmmaker Richard Raymond is based on the true story of a group of young Iranians, who form an underground dance troupe in the Islamic Republic of Iran. This is the latest in a genre of films that focus on dance as a form of freedom of expression against political oppression and social injustice. VOA’s Penelope Poulou has more.
Video

Video Turkey's Ruling Party Trying to Lure Voters in Opposition Stronghold

Turkey’s AK (Justice and Development) Party is seeking a fourth successive general election victory, with the goal of securing two-thirds of the seats in Parliament to rewrite the constitution and change the country's parliamentary system into a presidential one. To achieve that, the party will need to win seats in opposition strongholds like the western city of Izmir. Dorian Jones reports.
Video

Video Millions Flock to Ethiopia Polls

Millions of Ethiopians cast their votes Sunday in the first national election since the 2012 death of longtime leader Meles Zenawi. Mr. Meles' party, the Ethiopian People's Revolutionary Democratic Front, is almost certain of victory again. VOA's Anita Powell reports from Addis Ababa.

VOA Blogs