RBA hikes, BoC cuts

The Reserve Bank of Australia seems really determined to strike out on its own path. From Bloomberg yesterday:

Australia's central bank increased its benchmark interest rate for the second time in four weeks and said there are signs the highest borrowing costs in 12 years are prompting consumers and companies to temper spending.

Governor Glenn Stevens and his board raised the overnight cash rate target by a quarter point to 7.25 percent in Sydney today to stem the fastest inflation since 1991. Stevens said rates have risen "substantially" since mid-2007...

A report earlier today showed retail-sales growth unexpectedly stalled in January after rising for seven months.

The Bank of Canada, in contrast, appears to be taking its cues from the Federal Reserve. From Bloomberg yesterday:

The Bank of Canada cut its benchmark interest rate by half a point and signaled further reductions are needed to offset a slump in exports to the U.S.

Mark Carney, in his first decision as governor, lowered the target rate for overnight loans between commercial banks to a two-year low of 3.5 percent, the biggest reduction since 2001. Thirteen of 26 economists surveyed by Bloomberg News predicted the size of today's move.

Speaking of the Federal Reserve, we got more signals from officials there yesterday, some mixed. Reuters reports:

Fed Board Governor Frederic Mishkin said the U.S. economy faced grave risks and inflation pressures would abate -- remarks that will reinforce views that he backs further cuts in benchmark rates to buffer the economy.

"I see significant downside risks to this outlook. These risks have been brought into particularly sharp relief by recent readings from a number of household and business surveys that have had a distinctly downbeat cast," Mishkin told the National Association of Business Economics in Arlington, Va...

Dallas Fed President Richard Fisher...said separately on Tuesday that weak growth was a milder threat than inflation.

"Containing inflation is the purpose of the ship I crew for," Fisher told a conference in London.

"If a temporary economic slowdown is what we must endure while we achieve that purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient," he told the Society of Business Economists.

Chairman Ben Bernanke also spoke yesterday, but he focused on the foreclosure problem. MarketWatch reports:

The mortgage and financial-services industry will have to use fresh thinking to reduce preventable foreclosures, said Federal Reserve Board Chairman Ben Bernanke on Tuesday...

Bernanke agreed that home prices had further to fall, although he did not quantify by how much...

"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure," Bernanke said.