RBA presses 'play' button on rates
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BN
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2/03/2010 2:30:00 PM
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Having held off raising interest rates in February, the RBA has today, as expected, pushed up the official cash rate by 0.25%
The central bank's decision means that the official rate will rise to 4%. The question though remains - will the major banks increase their rates beyond the official increase.
Were they to do so, any justification would be hard for mortgage holders to swallow, given the healthy interim and quarterly profits announced recently by all the major banks as well as the continued thawing of wholesale funding markets.
Making the announcement today, RBA governor Glenn Stevens said that the global economy was growing, and world GDP was expected to rise at close to trend pace in 2010 and 2011.
"The expansion is still hesitant in the major countries...[but] in Asia, where financial sectors are not impaired, growth has continued to be quite strong. The authorities in some countries are now seeking to reduce the degree of stimulus to their economies," he said.
Stevens said in Australia economic conditions in 2009 were stronger than expected, after a mild downturn a year ago.
"The rate of unemployment appears to have peaked at a much lower level than earlier expected. Labour market data and a range of business surveys suggest growth in the economy may have already been at or close to trend for a few months," he added.
He also said there were some signs that the process of business sector de-leveraging was moderating, with the pace of decline in business credit lessening and indications that lenders are starting to become more willing to lend to some borrowers.
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