RBA governor Philip Lowe discussed his concept of the ‘narrow path’ on June 7th, in his efforts to explain how the central bank is trying to cool the economy by aggressively raising interest rates without having Australia fall into a recession. Here we will explore why the RBA was right to raise interest rates. Australia […]
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The case for (and against) rising interest rates — Part 1
Here we will look at why the RBA should not have raised interest rates on June 6.
US Fed raises interest rates by 25 basis points
In a unanimous decision, the US Federal Reserve raised rates for the tenth consecutive time. The benchmark federal funds rate is now in the range between 5% and 5.25%, a 16-yeah high. At a press conference following the decision, Fed chair Jerome Powell said central bank members ‘did talk about pausing, but not so much […]
Bank of Canada differs from US Fed, holds interest rates steady
The Bank of Canada is taking a different approach to its US counterpart, keeping its official interest rate steady for the first time since March 2022. After eight consecutive increases, the Bank of Canada paused hikes to assess the effects of its tightening policy. The official rate still sits at 4.5%. Headline inflation fell to […]
Jerome Powell: level of interest rates likely to be higher than previously anticipated
Jerome Powell delivered a sterner message on inflation than his Australian counterpart. US inflation has proved stickier than Powell and his colleagues expected. As a result, the Fed’s job is not likely to be finished any time soon. Testifying before a Congress committee, Powell said the stronger than expected recent economic data suggests that the […]
Interest rates may have to stay high for longer if the real neutral rate rises
The natural — or neutral — rate of interest is the rate of interest compatible with a stable level of economic activity where the price level is constant. It is the natural rate of interest that neither impedes nor stimulates the economy — the equilibrium rate, if you will. The natural rate is important for […]