Aus­tralian cbank set to keep rate at 4.75pc as econ­omy slows

The Pak Banker - - Company& -

SUDNEY: The Re­serve Bank of Aus­tralia is likely to keep its bench­mark in­ter­est rate un­changed to­mor­row as pre­vi­ous in­creases slow the econ­omy and re­duce the risk of faster in­fla­tion.

Gover­nor Glenn Stevens and his board will leave the overnight cash rate tar­get at 4.75 per­cent in Syd­ney to­mor­row, ac­cord­ing to all 25 econ­o­mists sur­veyed by Bloomberg News.

Stevens told law­mak­ers in tes­ti­mony 10 days ago that "there's un­likely to be any­thing from us im­mi­nently" on bor­row­ing costs.

Aus­tralia's econ­omy prob­a­bly won't reach the cen­tral bank's fore­cast 3.5 per­cent growth in 2010 af­ter it ex­panded last quar­ter at the slow­est pace in al­most two years, ac­cord­ing to Cit­i­group Inc. Stevens' aim to con­tain prices was aided by some of the nation's largest banks boost­ing mort­gage rates by al­most dou­ble the Re­serve Bank of Aus­tralia's quar­ter-per­cent­age­point in­crease on Nov. 2.

"With rates up in Novem­ber, in­fla­tion un­der con­trol and the econ­omy los­ing mo­men­tum in the past quar­ter, clearly now is not the time to be lift­ing rates fur­ther," said Craig James, a se­nior econ­o­mist at Com­mon­wealth Bank of Aus­tralia in Syd­ney. debt cri­sis there."

Aus­tralia's cur­rency de­clined to 99.01 U.S. cents as of 11:33 a.m. in Syd­ney from 99.31 cents in New York last week. It reached 99.39 cents on Dec. 3, the most since Nov. 22.

Traders bet there is a 90 per­cent chance Stevens will leave bor­row­ing costs un­changed through the first quar­ter of next year, ac­cord­ing to Bloomberg cal­cu­la­tions based on in­ter­bank fu­tures on the Syd­ney Fu­tures Ex­change.

The cur­rency de­clined 2.5 per­cent against the U.S. dol­lar over the past month as re­ports in­di­cated a slow­ing econ­omy.

Re­tail sales de­clined in Oc­to­ber by the most since July 2009, ac­cord­ing to data re­leased last week, and a pri­vate re­port showed con­sumer con­fi­dence fell in Novem­ber to a five-month low. House­hold spend­ing ac­counts for about half of the nation's gross do­mes­tic prod­uct.

Busi­ness prof­its also dropped in the three months through Septem­ber, the first quar­terly de­cline in more than a year.

Lend­ing to busi­nesses slid 0.8 per­cent in Oc­to­ber from Septem­ber, ac­cord­ing to the cen­tral bank.

The econ­omy grew 0.2 per­cent in the third quar­ter from the pre­vi­ous pe­riod, the worst per­for­mance since a con­trac­tion at the end of 2008, a govern­ment re­port showed on Dec.

Stevens, in tes­ti­mony to the House of Rep­re­sen­ta­tives Com­mit­tee on Eco­nom­ics on Nov. 26, said while last month's de­ci­sion to raise rates was finely bal­anced, it was typ­i­cally bet­ter to move ear­lier than later.

"We have to bal­ance that risk, ob­vi­ously, against the risk of get­ting be­hind the game and his­tor­i­cally, for many cen­tral banks in­clud­ing us, that has tended to be the mis­take that we made," the gover­nor told law­mak­ers.

Aus­tralia's cur­rency reached par­ity with the U.S. dol­lar in Oc­to­ber as traders bet the cen­tral bank would boost bor­row­ing costs and the Fed­eral Re­serve pre­pared to pump ad­di­tional stim­u­lus into the world's largest econ­omy.

The Re­serve Bank of Aus­tralia is seek­ing to con­tain an ex­pected ac­cel­er­a­tion in in­fla­tion as Aus­tralia ex­pe­ri­ences a re­source in­vest­ment boom that is prompt­ing com­pa­nies to in­crease hir­ing to meet de­mand from China. - PB News

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