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 Financial Happenings Blog 
Tuesday, February 20 2007

I was interested to come across an ABC article today that quoted the Reserve Bank of Australia's governor, Glenn Stevens as saying during a Federal parliamentary committee hearing that, 'As a statement of probabilities, a rise (in interest rates) is more likely than a fall'.

I find this very interesting.  At the last rise in November, and in the time since, the commentary from 'financial analysts' has been that interest rates have peaked, and that the next move will be down.

It is interesting to see who the experts used to commentate on these things are - most commonly they are employed by the big banks, such as Chris Caton who is employed by BT/Westpac.

These experts have been pretty consistent in the story over the past 18 months - underestimating the liklihood of interest rate rises and tending to talk them down.  12 months ago no-one was predicting 3 interest rate rises and, according to the Reserve Bank of Australian, more chance of a rise than a fall to come.

What I had not thought of is that these people - who are generally employed by banks - have employers who benefit from interest rates being low.  Therefore public comment by bank economists about lower rates helps their employers as banks customers are more likely to spend more money on credit, borrow more money to buy houses and so on when interest rates are low.

It is an interesting conflict of interest.



Posted by: Scott Francis AT 09:04 pm   |  Permalink   |  Email
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