Fixed Versus Variable

By Mark Boulton – 29th august 2009

I think the RBA should be raising rates by 0.25% next week, because because business investment is very strong, and because an indicator named the TED spread is suggesting the financial crises is over (the lower the TED spread the better – more info here and chart here. Also I think there needs to be a reminder to those planning to speculate or invest using cheap money, that the cheap money is very temporary. The current settings are way too stimulatory. Without cranking up interest rates we will have higher interest rates in the longer term due to higher inflation.

However the RBA may be more cautious than I am and wait for more evidence that it is required. My guess is there is a 50% chance of no change, 45% chance of a 0.25% rate change, and 5% chance that it will go up half a percent. So lets see what the RBA does!
See . . . what rates might be worth fixing at?

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