While investors await for the Fed’s decision on Wednesday whether to keep the rate at the historic lows or even change the wording of its policy stance via its minutes, the Australian central bank again moved in conjunction with developments in the global economy by raising its key rate by another 25 basis points in just 1 month. This brings Australia’s cash rate to 3.5%.
The Reserve Bank’s move reflects concerns that inflationary pressures are beginning to build and fears that a residential property bubble could be forming.
By world standards, Australia’s economy has performed solidly during the global downturn, skirting recession by recording only one quarter of contraction.
The Australian government this week upgraded its economic growth forecast for the 12 months to next June to 1.5 per cent, a turnround on the 0.5 per cent contraction predicted only six months ago.
Canberra this week also forecast that unemployment would peak at 6.75 per cent, down from a previous estimate of 8.5 per cent, and predicted that budget deficits and government borrowings would be lower than it expected in May.
This isn’t much of a headline in the sense that it isn’t much of a market mover. We wait for the Fed’s minutes on Wed and the ECB and BoE’s on Thursday.