Global economic recovery prompts rate rise
The Reserve Bank of Australia (RBA) yesterday raised the cash rate to 3.5 percent, a rise of 25 basis points and the second consecutive increase after October’s 25-point rise.
In a statement, RBA governor Glenn Stevens attributed the increase to global events: “The global economy has resumed growth. With economic policy settings likely to remain expansionary for some time, the recovery is likely to continue during 2010 and forecasts have been revised higher.”
While he tempered growth prospects as “modest in the major countries”, he did acknowledge that “prospects for Australia’s Asian trading partners appear to be noticeably better”.
He added: “Growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets. For Australia’s trading partner group, growth in 2010 is likely to be close to trend.”
Stevens also recognised the effects of a rising Australian dollar, which he said “is likely to constrain output in the tradeables sector and dampen price pressures”.
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