Race day rate shock
(2 November 2010 – Australia) The Reserve Bank of Australia has raised interest rates by 25 basis points to 4.75 percent, dismissing calls from the International Monetary Fund (IMF) to keep rates steady.
The move has come as a shock to the market and many economists, which were predicting the official cash rate would remain at 4.5 percent, and is set to affect homeowners, retailers and importers.
The IMF said earlier in the week that the RBA had made the right move by leaving rates steady since may, and urged them to continue the trend into November.
"With lending rates in Australia close to 10-year averages and economic activity responding quickly to cash rate adjustments, the RBA has scope to wait for the outlook to become clearer" the IMF said in a statement.
According to Reserve Bank governor, Glenn Stevens, the decision comes as global economies improve, however noted that a drop in government spending was causing a fall in demand.
"The rise in the terms of trade, which is now boosting national income very substantially, is likely to lead to stronger private spending over the next couple of years, especially in business investment," he said in a statement.
The IMF said earlier in the week that the RBA had made the right move by leaving rates steady since may, and urged them to continue the trend into November.
"With lending rates in Australia close to 10-year averages and economic activity responding quickly to cash rate adjustments, the RBA has scope to wait for the outlook to become clearer" the IMF said in a statement.
According to Reserve Bank governor, Glenn Stevens, the decision comes as global economies improve, however noted that a drop in government spending was causing a fall in demand.
"The rise in the terms of trade, which is now boosting national income very substantially, is likely to lead to stronger private spending over the next couple of years, especially in business investment," he said in a statement.
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