Australia’s central bank’s latest 25 basis point rate increase shows a strategy in stark contrast to the US Federal Reserve board, which appears determined to cause a recession.
compared to the heavy-handed and highly risky approach taken by the US Federal Reserve board.
Fed chairman Jerome Powell and the RBA’s Philip Lowe are taking a different approach to fighting inflation.This strategy, which is likely to be repeated in December, gives the central bank an opportunity to assess the impact of earlier moves and avoid a recession.
Including refinancing, overall mortgage applications hit a 20-year low last week. This rapid decline in the US housing market is a function of the surge in interest rates with 30-year fixed rate mortgages now at 7 per cent. Powell should take a leaf out of Lowe’s book, and recognise that monetary policy is a blunt instrument that operates with a lagged effect.
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