Australian Reserve Bank Raises Rate

The Reserve Bank of Australia has raised its short-term interbank cash rate by 25 basis points, citing the likelihood that the rise in home prices will prove "expansionary" for the economy among its reasons for the move."For an extended period, the setting of monetary policy in Australia has been mildly expansionary. This stance was, in the Board's judgment, the best response to a weak world economy, very low global interest rates, downside risks to growth at home, and contained inflation. However, the need for such a stance of policy has now passed. This assessment is based on several considerations," the bank said in a Nov. 5 press statement posted on its website. The move surprised the market, according to RBS Greenwich Capital market strategist Peter McTeague's Treasury Morning Call report. Although other factors were cited, the "housing/credit bubble" was the bank's focus in making the move, according to Mr. McTeague. The Reserve Bank of Australia can be found online at http://www.rba.gov.au.

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