 |
|
||
 |
|||
 |
 |
 |
   |  | ||||||||||||
Australia hikes interest rates
 RBA Governor Ian Macfarlane, left, will hand over to his deputy Glenn Stevens, right, in September. YOUR E-MAIL ALERTSSYDNEY, Australia (CNN) -- Australia's central bank has raised its key interest rate to 6.0 percent, citing inflation pressures and strong economic activity. The increase in the cash rate by a quarter of a percentage point was widely expected by markets. The cash rate is now at its highest since February 2001 and follows a similar rise of a quarter of a percentage point in May. The Reserve Bank of Australia announced the move Wednesday morning, following a meeting of its board Tuesday. RBA Governor Ian Macfarlane said underlying inflation in the June quarter was estimated to have picked up to a rate of just under 3 percent, "confirming the upward drift that had started to become apparent in the previous quarter." The bank's target is to keep underlying inflation within a range of 2 percent to 3 percent, on average, over the economic cycle. High food and fuel costs in the first half of this year have already pushed the consumer price index to an annual rate of 4.0 percent as at June 2006. Macfarlane, who ends 10 years as governor on September 17 and will then hand over to his deputy, Glenn Stevens, said Wednesday that the growth of demand in Australia, against the background of an economy "operating with limited spare capacity," had contributed to increased inflationary pressures this year. Australia's overall economy has been growingly strongly on the back of a commodities boom, reflecting vigorous demand from emerging economies such as China and India. Domestic consumer demand has also been up and unemployment rates have fallen. But there has been a slowdown in some sectors of the economy recently, notably in housing and construction. The latest rate rise is expected to have a negative effect on the property market in Australia's most populous state, New South Wales. HSBC Australia chief economist John Edwards said in a commentary after the RBA announcement that 6.0 percent "could well be the top," unless there was a deterioration in the inflation outlook. "Our own view is that this rate increase -- the seventh consecutive increase over the last three years -- will have an impact on an already subdued household sector, that the downturn in U.S. growth evident in the second quarter will take some of the fizz out of global growth, and that wage pressures in Australia will remain contained," Edwards noted. The Australian dollar, already up 3 percent last month in anticipation of the rate rise, is slightly firmer at 76.67 U.S. cents. The share market is weaker, with the benchmark S&P/ASX200 down 0.72 percent in early trade Wednesday. 
|
| ||||||||||||
 |
|
| © 2007 Cable News Network LP, LLLP. A Time Warner Company. All Rights Reserved. Terms under which this service is provided to you. Read our privacy guidelines. Contact us. Site Map. |
|
External sites open in new window; not endorsed by CNN.com
Pay service with live and archived video. 
