Although it carries risk, there’s a currency reward for any central bank with the guts to hike interest rates before everyone else does. The first was actually Israel. Now Australia’s gone and done it.
Bername (Melbourned): The Reserve Bank of Australia (RBA) has raised the cash interest rate and says it is prudent to begin lessening the monetary policy stimulus in the local economy because conditions are improving.
It has lifted the cash rate by 25 basis points to 3.25 per cent after its board meeting on Tuesday.
The move was not widely expected, with most economists tipping the central bank to leave the rates unchanged, according to the Australian Associated Press.
As you can see, the RBA hasn’t gotten to where much of the developed world is, where we have to basically give away free money in order for interest rate cutes to have a stimulative effect. A 3.00% rate was obviously plenty low for them.