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Cash rate up by 25 basis points to 7.0 per cent.

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  • Cash rate up by 25 basis points to 7.0 per cent.


    At its meeting today, the Board decided to increase the cash rate by 25 basis points to 7.0 per cent.

    Recent information points to significant inflation pressures. CPI inflation on a year‑ended basis picked up to 3 per cent in the December quarter, with underlying measures around 3½ per cent. This was a little higher than was expected a few months ago. Indicators of demand remained strong through the second half of 2007, and reports of high capacity usage and shortages of suitable labour persist. In the short term, inflation is likely to remain relatively high and will probably rise further in year‑ended terms, though the Bank expects it to moderate somewhat next year.

    The Board took careful note of recent events abroad and developments in financial markets. The world economy is slowing and it now appears likely that global growth will be below trend in 2008. Recent trends in world commodity markets suggest, however, that Australia’s terms of trade are likely to rise further.

    The pressures in short-term money markets seen late last year have eased in recent weeks, but sentiment in international capital and equity markets remains fragile. In Australia, financial intermediaries have passed on higher costs to their customers over the past couple of months. There has also been some tightening of lending standards to risky borrowers, a process which may yet have further to go.

    These developments, together with the effects of earlier changes to monetary policy, can be expected to exert a moderating influence on private demand in Australia over the period ahead. But given the extent of pressure on capacity and the build up in inflation, a significant slowing in demand from its recent pace is likely to be necessary to reduce inflation over time.

    Having weighed both the international and domestic information available, the Board concluded that a tighter monetary policy setting was needed now. In future meetings, the Board will continue to evaluate whether the stance of policy will be sufficiently restrictive to return inflation to the 2-3 per cent target.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    HOME owners struggling with mortgage repayments are set to face more hardship following the Reserve Bank of Australia’s (RBA) decision to raise interest rates a quarter of a percentage point to 7 per cent.

    This is the highest interest rates have been in 12 years, adding about $50 a month to the average Australian mortage.

    The 25-basis-point interest rate rise - the sixth in two years - was ordered after underlying inflation hit 3.6 per cent in the December quarter.

    The RBA aims to keep underlying inflation between 2 and 3 per cent.

    Some economists predicted the RBA would raise rates by 50 basis points – to 7.25 per cent - in a bid to get inflation under control.

    Economists predict a further rise of 25 basis points in March.

    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx


    • #3
      Yep - another rate rise now and one in Mar.

      What will happen?

      Rents will keep going up and up as they have done, and this will feed into inflation, causing further interest rate rises.

      Oz needs 185 000 new dwellings each year, we build around 150 000 and have very strong immigration levels and low unemployment.

      Its a recipe for inflation.

      Last edited by Timbo; 05-02-2008, 08:31 PM.