Australia raises interest rate to 7.0%. - Forex & Currency Trading Blog

February 5, 2008 - Forex Economic News

Australia raises interest rate to 7.0%.

The Reserve Bank of Australia increased its interest rate 25 basis points today to 7.0 percent, the highest level since July of 1996. Australia raised its interest rate by 25 basis points for the third time since August 2007 in an effort to combat increasing inflation which is rising above the RBA's inflation target of 2 to 3 percent.

Australia's Glenn Stevens, Governor of Monetary Policy, commented on the data behind the rate increase, "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."

The RBA may be done raising rates for now as the statement cited that with a global economic slowdown in progress, the effects of inflation on Australia's prices and tightening in lending practices may cause a future slowing in Australia's economy and help bring down inflation to target levels. The next RBA interest rate decision will be on March 4, 2008. The Australian dollar is trading at 0.8979 per USD in U.S. session trading.

Tags: AUD, Australia Interest Rates, RBA

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