Australian Dollar Bounces Back Strongly
Former Australian central bank director John Edwards estimates Reserve Bank may raise interest rates eight times in next two years. The bank is likely to have begun to consider the rate hike program. The central bankers expect Australia’s inflation to continue to return to the target. Australia’s economic growth rate will also be driven by the global economy accelerated to 3%. News to stimulate the Australian dollar jumped 0.43%, from the original 75.79 cents rushed 76.15 cents.
Edwards said Australia’s long-term cash rate is about 3.5%. It’s more than the average interest rate of 5.2% over the past 20 years. However, still much higher than last year in August to maintain the official interest rate of 1.5%.
Rate Action will Raise
In other words, if the Australian central bank start raising interest rates from next year, and within two years to achieve the above interest rate targets, you need to raise interest rates by 4 yards each year. Edwards writes if the economic forecast is accurate, it will raise interest rates by 8 yards in next 2 years. The possibility seems unlikely.
Edwards added that the Australian central bank would traditionally only raise interest rates slightly and would not commit to the next interest rate moves, making the market less willing to predict the bank’s policy over the next two to two years. But at least it is reasonable to speculate that the Australian central bank that the current interest rate “particularly low”, and economic improvement as expected, so the next interest rate action will be raised.
In addition, if the Australian economy is willing to reach a central bank target of 3% growth rate and 2.5% inflation rate, the bank will think that natural policy interest rates at least up to 3.5%. Edwards believes the Australian central bank will want to raise the policy rate to meet the Australian economic performance improve. That’s why the interest rate will be at least by the end of 2019 to 3.5%
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