Tuesday, November 2, 2010

Reserve Bank of Australia Increases Cash Rate to 4.75%

The Reserve Bank of Australia increased the cash rate by 25 bps to 4.75% from 4.50%. The RBA in announcing its decision noted the weight of risks were slanted to inflation with the Australian economy benefiting from a high terms of trade:
"However, the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent good results on inflation, the risk of inflation rising again over the medium term remains. At today's meeting, the Board concluded that the balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent."
The next Reserve Bank Board meeting is on the 7th of December 2010.



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