Holding rates down for the wrong reason

Over the past 7 days, the Canadian, Australian and British central banks kept interest rates on hold. 

The Bank of England’s decision to stand pat appears to be a surprise.

It’s not. 

Central bankers in the countries listed above are at risk of losing control of the long end of the interest rate curve.

I’ll reiterate that these central banks are loathed to raise interest rates because it will affect their heavily indebted citizens (who are carrying too much personal debt) and are relying on soaring property prices to boost their wealth, which I’ve pointed out in the article links below. 

Increasing interest rates puts all of that wealth creation at risk.

Their reasonings for keeping rates low will be to not stifle economic growth. 

No central banker ever got in trouble for NOT putting up rates. 

Inversely, New Zealand and Norway are raising rates to put a lid on extraordinary asset growth, while their citizens also rank amongst the most indebted.

The bankers in the rising rate camp are citing the need to keep a lid on runaway real estate prices and the cost of living. 

https://robzdravevski.com/2021/10/13/rising-gdp-means-higher-inflation-and-interest-rates/

https://robzdravevski.com/2021/08/06/the-delicate-game-of-interest-rates-inflation/

November 5, 2021
by Rob Zdravevski 
rob@karriasset.com.au