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.
Expelled from Pakistan, Afghan Refugees Return to Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Expelled from Pakistan, Afghan Refugees Return to Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
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 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 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 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.

VOA Blogs