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1.Market Observations, 8.Was Sticky

24 Mar 2017 (AFR) – Reserve Bank trapped by housing, says PIMCO

(24 March 2017, AFR, p20, by Jonathan Shapiro)

‘PIMCO’s Australian head Rob Mead says indebted households have caught the Reserve Bank in a trap.  While the US Federal Reserve may put its foot firmly on the brake if it needs to slow its economy, a slight tap by the RBA may prove too jarring.  The reason the central bank is trapped, he says, is because Australians have taken on more debt at low interest rates, making households “highly sensitive to even small upward changes in the cash rate”. ‘

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