Australia’s central bank raised its benchmark interest rate for the fifth time in six meetings, dismissing warnings that higher borrowing costs are already eroding consumer spending.
Governor Glenn Stevens increased the overnight cash rate target to 4.25 percent from 4 percent, the Reserve Bank of Australia said in a statement in Sydney today. The decision was predicted by 13 of 23 economists in a Bloomberg News survey.
Hey, 4.25% isn't bad compared to darn near zero Stateside. Professional bond managers are beginning to come around too:
Pacific Investment Management Co., which runs the world’s biggest mutual fund, favors currencies in China, Brazil, Canada and Australia on expectations they offer attractive returns amid an uneven global economic rebound.
Earth to Fed: Indefinitely holding the target rate at zero will hurt the U.S. whether or not there's a recovery. Indeed, U.S. Treasuries are no longer considered a safe haven due to the U.S.'s increasing sovereign default risk. Unattractive yields may be the trigger that sparks a run on the dollar if foreign investors decide they've had enough of holding dollar reserves that earn nothing.
