RBA hints at rate rise

RBA hints at rate rise

15 September 2009 by Staff Reporter 0 comments

The likelihood of a November rate hike has increased with The RBA’s minutes of the monetary policy meeting showing the situation in the global economy is improving.

Despite the bank’s decision to leave interest rates unchanged at 3 per cent, the RBA said the Australian economy's recovery from the global financial crisis, particularly since the collapse of US investment bank Lehman Brothers a year ago today, had been strong.

“At the previous meeting, members had agreed that if the economy continued to evolve as in the latest forecasts, the Bank would in due course need to adopt a less expansionary policy stance.

"The information at this meeting suggested that economic conditions were indeed evolving broadly in that way. Nonetheless, some uncertainty remained about the outlook both abroad and at home,” the minutes read.

“As at the previous meeting, members noted that the policy decision in the near term involved balancing the risk of over staying an accommodative stance, and that of prematurely tightening and adversely affecting confidence and demand.

“The meeting concluded that the balance was best struck by leaving the cash rate unchanged for the time being, pending further evaluation of incoming information at future meetings.”

Following the release of the minutes, the financial markets are now tipping the official cash rate to soar 150 basis points within a year, according to the Australian – the equivalent of six 25 basis point hikes.

The likelihood of a November rate hike has increased with The RBA’s minutes of the monetary policy meeting showing the situation in the global economy is improving.

Despite the bank’s decision to leave interest rates unchanged at 3 per cent, the RBA said the Australian economy's recovery from the global financial crisis, particularly since the collapse of US investment bank Lehman Brothers a year ago today, had been strong.

“At the previous meeting, members had agreed that if the economy continued to evolve as in the latest forecasts, the Bank would in due course need to adopt a less expansionary policy stance.

"The information at this meeting suggested that economic conditions were indeed evolving broadly in that way. Nonetheless, some uncertainty remained about the outlook both abroad and at home,” the minutes read.

“As at the previous meeting, members noted that the policy decision in the near term involved balancing the risk of over staying an accommodative stance, and that of prematurely tightening and adversely affecting confidence and demand.

“The meeting concluded that the balance was best struck by leaving the cash rate unchanged for the time being, pending further evaluation of incoming information at future meetings.”

Following the release of the minutes, the financial markets are now tipping the official cash rate to soar 150 basis points within a year, according to the Australian – the equivalent of six 25 basis point hikes.

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