Interest rates up again
December 1, 2009
The Reserve Bank of Australia raised the cash rate by 25 basis points to 3.75% today, the third consecutive monthly rise. In explaining the decision Reserve Bank Governor Glenn Stevens said that the global economy was growing again and although modest in the US and Europe, in Asia the recovery had been strong, with capital flows into Asia and other emerging regions gaining strength.
The central bank also pointed to the fact that Australia dodged the recession, with only a relatively mild downturn in the economy, with unemployment set to peak at considerably lower levels than forecast in the first half of the calendar year.
Mr Stevens also referred to the inflation level which remains subdued, with the bank referring to ‘temporary factors’.
”Both CPI and underlying inflation are expected to be consistent with the target in 2010,” Mr Stevens said.
Credit for housing had grown strongly, though the bank noted the decline in business credit as companies deleverage their balance sheets.
”With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” Mr Stevens concluded.
The central bank also pointed to the fact that Australia dodged the recession, with only a relatively mild downturn in the economy, with unemployment set to peak at considerably lower levels than forecast in the first half of the calendar year.
Mr Stevens also referred to the inflation level which remains subdued, with the bank referring to ‘temporary factors’.
”Both CPI and underlying inflation are expected to be consistent with the target in 2010,” Mr Stevens said.
Credit for housing had grown strongly, though the bank noted the decline in business credit as companies deleverage their balance sheets.
”With the risk of serious economic contraction in Australia having passed, the Board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,” Mr Stevens concluded.
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