| Australia raises interest rate to 3.5% for second month in a row |
|
03/11/2009 14:36 (18 Day 01:23 minutes ago) | |||||
|
The FINANCIAL -- Australia’s central bank on November 3 raised its interest rates for the second time in just over a month to 3.5% from 3.25%. The bank said that the move was justified by the improving economic outlook.
The move by its central bank was not unexpected as the Australian economy was the only one in the developed world to expand in the first half of 2009, BBC reported. In fact, Australia managed to avoid recession, only seeing its economy contract in the last quarter of 2008.
So far, only Norway and Israel have begun to nudge up the cost of borrowing again: each has raised its key rate by a quarter of a percentage point in recent months, reflecting the relatively robust recovery that those countries have enjoyed this year, The New York Times informs. Elsewhere, including in the United States, Japan and Europe, rate increases remain a more distant prospect as the recovery still remains fragile and far less pronounced.
But policymakers in those countries, too, have begun to signal a gradual exit from some of the other extraordinary stimulus measures they introduced after the collapse of Lehman Brothers in September 2008 triggered a financial crisis and global economic slump, according to the same source.
AFP reported that the interest rate rise comes after the government of Australia on Monday sharply lifted its economic forecasts, flagging growth of 1.5 percent instead of a 0.5 percent contraction and indicating that unemployment will peak at a relatively modest 6.75 percent.
The central bank aggressively slashed the rate from 7.25 percent last September to a 49-year low of 3.0 percent, while the government injected stimulus worth more than 70 billion dollars (63 billion US) into the economy, according to the same source. Central bank governor Glenn Stevens said economic conditions had been stronger than expected and measures of confidence had improved thanks to the stimulus measures, while private investment appeared not be as weak as forecast.
"The expansion is generally expected to be modest in major countries," Stevens, said, CNN Money reported. "[But] Prospects for Australia's Asian trading partners appear to be noticeably better." "With the risk of serious economic contraction in Australia now having passed, the board's view is that it is prudent to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared much weaker."
According to the same source, he added that the rate increases in October and November would help boost the "sustainability" of economic growth and "keep inflation consistent with the target over the years ahead".
|
|
|
