Australia and India kick off interest rate week with rises

This week has been described as “the busiest week in decades” as interest rate decisions are expected across the globe.

Today, Australia and India have both opted to raise interest rates by 0.25% amid rising inflation.

The Reserve Bank of Australia (RBA) lifted rates to 4.75% - a move which surprised analysts.

Australia was the first economy to raise rates from a 50-year low as the economic downturn eased. Other major economies opted for lower interest rates to boost their economies.

The country is one of the few developed economies not to have fallen into recession like its counterparts throughout the world as it has benefited from an increase in commodity prices, while exports have received a boost due to demand from China for its iron ore and other raw materials.

In the meantime, the Reserve Bank of India (RBI) raised rates for the sixth time since the start of the year, in a bid to tame stubbornly high inflation in a thriving economy.

The RBI raised the repo rate, the rate at which it lends to commercial banks, to 6.25%.

India’s inflation rate, which is the highest among the Group of 20 leading nations, has risen due to soaring food costs.

Annual food inflation has surged, causing major problems for the 450 million people who live below the poverty line.

Meanwhile, US central bank, the Federal Reserve, will commence its 2-day meeting today.

The US central bank looks as if it will adopt measures to safeguard the recovery after minutes of the 21 September meeting said the Federal Open Market Committee (FOMC) was “prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.”

There have been concerns for the US economic recovery, after rising unemployment and a sluggish recovery.

The Bank of Japan, meanwhile, brought its next rate-setting meeting forward by 10 days and will now take place on 4-5 November – taking place shortly after the Federal Reserve’s meeting.

This will leave the BoJ to respond to any measures the US central bank decides to adopt as the Japanese yen continues to strengthen against the dollar.

Meanwhile, the Bank of England will announce its decision on interest rates on Thursday. There has been speculation that the Bank may increase its quantitative easing (QE) programme.

However, recent strong data from the British economy suggests that the Bank will hold off injecting more money into the economy by way of its QE programme for the short-term at least.

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