Reserve Bank Of Australia Cautious On Further Interest Rate Hikes
Weak consumer spending and the fragile global economic recovery may have produced an air of caution at the Reserve Bank of Australia (RBA), which may hold back on pace at which it is hiking interest rates, after recent business survey results suggest the recovery in Australia may be faltering.
On Tuesday, the RBA said it was waiting for stronger evidence of the impact of its most recent interest rate tightening cycle before it begins increasing interest rates further.
According to the minutes of the RBA board meeting, held on February 2nd, the central bank expressed concern that consumer spending had waned during the run up to Christmas, and that three consecutive interest rate hikes plus the effect of the government stimulus package drawing to a close had taken much of the froth out of the property market.
Despite the decision by the central bank to hold official interest rates at 3.75 per cent being finely balanced, the RBA is still of the belief that it will need to continue raising interest rates during the rest of the year, with the decision to hold giving the central bank time to monitor overseas events, and the state of the Australian economy.
JPMorgan chief economist Stephen Walters said yesterday: “The main message is that the Reserve Bank is in no rush to hike again. Some of the main issues on which RBA officials want more clarity, including the offshore sovereign issues, will take some time to resolve.”
On Tuesday, NAB released the results of its business survey which was fairly downbeat, and suggested that Australian businesses were facing rapidly deteriorating business conditions and declining order books during January.
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