Analysts wrong, rates remain
(3 February 2010 – Australia) The Reserve Bank of Australia has stunned most analysts by keeping the official cash rate at 3.75 percent.
Bloomberg surveyed 20 economists and the results spoke volumes, or so we thought, with all of the 20 economists expecting a rate rise of 25 basis points.
Even the betting agency Centrebet was refusing to open a book on this rate decision, for the first time since it started taking wagers on rate movements, because it thought the outcome was too certain.
The expectation was due to the fact that the Reserve Bank had made three consecutive rate rises at the end of 2009.
After December’s rate rise and Westpac’s shock decision to exceed the RBA’s decision, Treasurer Wayne Swan warned the major banks not to increase their rates over the official cash rate this time around.
The RBA’s governor, Glenn Stevens, said in a statement that the global economy is growing and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity.
In Australia, economic conditions have been stronger than expected, after a mild downturn a year ago. Inflation has, as expected, declined in underlying terms from its peak in 2008, Mr Stevens added.
Even the betting agency Centrebet was refusing to open a book on this rate decision, for the first time since it started taking wagers on rate movements, because it thought the outcome was too certain.
The expectation was due to the fact that the Reserve Bank had made three consecutive rate rises at the end of 2009.
After December’s rate rise and Westpac’s shock decision to exceed the RBA’s decision, Treasurer Wayne Swan warned the major banks not to increase their rates over the official cash rate this time around.
The RBA’s governor, Glenn Stevens, said in a statement that the global economy is growing and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity.
In Australia, economic conditions have been stronger than expected, after a mild downturn a year ago. Inflation has, as expected, declined in underlying terms from its peak in 2008, Mr Stevens added.
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