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  • Reserve Bank of Australia Opts For Wait-and-See 0 comments
    Feb 2, 2010 1:23 AM

    The Reserve Bank of Australia today decided to keep interest rates on hold at 3.75%.

    The pause comes after three consecutive hikes of 25 basis points in October, November, and December in 2009.

    The main drivers of this decisions were that inflation is expected to remain within the target range for most of 2010, and that global risks to the recovery remain, and mentioned the commencement of tightening in China.

    Most importantly the RBA referred to the fact that lenders had passed through the previous rate hikes - and then some.

    In fact the RBA surmised that lenders had increased rates by about 1%, and therefore it was prudent to leave rates on hold and see how the economy evolves.

    They will likely continue tightening later in the year provided that economic activity picks up to confirm such a move, as rates are still "below average".

    Thus the RBA has simply taken a brief pause on the road back to neutral settings.

    Disclosure: "No Positions"

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