Australia raises interest rate to 7.25%. Retail Sales unchanged, Current Account deficit rises.

March 4, 2008 - Forex Economic News

Australia raises interest rate to 7.25%.

The Reserve Bank of Australia increased its official cash lending rate 25 basis points today to 7.25 percent, the highest level since reaching 7.50 percent in December of 1996. Australia raised its interest rate by 25 basis points for the fourth 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, stated in the report that "This adjustment was made in order to contain and reduce inflation over the medium term. Inflation was high in 2007, with an annual CPI increase of 3 per cent in the December quarter and underlying measures around 3½ per cent. Domestic demand grew at rates appreciably higher than the growth of the economy’s productive capacity over the year" and "the Board concluded that a further tightening in monetary policy was needed to secure an inflation rate of 2-3 per cent over time."

Retail Sales unchanged, Current Account deficit rises.

In addition to the interest rate decision, economic news was released out of Australia today in the form of retail sales and the current account balance. A report by the Australian Bureau of Statistics showed that Australian retail sales were unchanged in January after increasing a revised 0.4 percent in December and 0.8 percent in November.

The Australian Current Account deficit rose by 18 percent in the quarter ending in December 2007 according to an Australian Bureau of Statistics report. The seasonally adjusted account deficit rose to 19.3 billion dollars(AU) from a 16.3 billion dollar(AU) deficit in the quarter ending in September 2007. The deficit on the balance of goods and services increased by 43 percent while the income deficit increased by 8 percent.

Tags: interest rate, cash rate, australia, retail sales, current account, australian news

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