Amidst a strong, vibrant economy, Australia central bank decided to maintain its key cash rate interest rate steady at 3.75%(2nd February 2010). This so surprised many analysts who had expected an increase to 4.0 per cent given signs of impending strength in the economy.Let us read the Reuters report today.
"The Reserve Bank of Australia (RBA) made the announcement following its monthly policy meeting.
The Australian dollar fell as investors pared chances of an interest rate rise in March after the RBA’s announcement.
March bill futures rallied to 95.78 from 95.570 before while the Australian dollar fell to $0.8838 from $0.8920.
“A big surprise they left rates unchanged ... they made a couple of mentions of what might be triggering that, the Chinese slowing down their economy, and sovereign concerns have increased.” said Stephen Walters, chief economist at JP Morgan
“I think they’re taking a tactical move to wait and see what’s going to happen over the next few months, and what the impact of the earlier rate hikes will be.”
“They make it clear interest rates have to be adjusted, which is code for going up, they’re just not sure about how quickly they need to do it, so they’re being tactical.”
Warren Hogan, ANZ’s head of Australian Economics, said: “It’s a big surprise to the market and most forecasters, including us.
“What they’ve told us is the case for further interest rate increases is there – they’ve explicitly stated it – but they just want to see a little bit more information about how the economy is reacting to the rate hikes from last year.
“So I don’t think this fundamentally changes the outlook for interest rates, which is for them to move higher. We still think they’ll get to 4.75 (by the end of the year). I think they’ll go next month (for the next move).”
So the stand-down on interest rate is not really going to stump the positive expectations of many. They expect the authorities to up the rates at the subsequent meetings this year.
We shall wait.
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