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RBA’s upbeat outlook fuels fear of rate rise

22 July 2009 Reporter

The Reserve Bank of Australia (RBA) has said the global economy is stabilising and the country can expect to enjoy subdued growth over the next two years.

In the minutes of its July 7 monetary policy board meeting, released yesterday, the RBA said the economy had been unexpectedly resilient.

“Housing loan approvals had recorded a strong increase, and house prices were again picking up, with the rises becoming more widespread.

“The outlook thus remained for a gradual recovery to begin later in the year, and downside risks to that had diminished,” the RBA said.

The receding threat of a recession has further fuelled speculation that interest rates have now bottomed out.

Over the past week, financial markets have reeled in their expectations of a 0.25 of a percentage point rate cut next month from 25 per cent to 11 per cent.

They are now tipping that the official cash rate will rise from 3 per cent to 3.75 per cent over the next 12 months.

RBA’s upbeat outlook fuels fear of rate rise
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