The Reserve Bank of Australia increased the national benchmark rate for the second time in 2008 from 7.00% to 7.25%. The last time interest rate was increased on the 5th of February.
Currently benchmark interest rate in Australia is the highest since 1996. RBA believes that the recent borrowing tightening contributed to the slowing of the inflation as the consumers began to spend less:
Having weighed both the international and domestic information available, the Board concluded that a further tightening in monetary policy was needed to secure an inflation rate of 2‑3 per cent over time. As a result of this and earlier actions, and rises in borrowing costs which are occurring independently of changes in the cash rate, the overall tightening in financial conditions since the middle of 2007 is substantial.
The record high inflation rate has been a major reason for the Australian central bank to maintain a very tight monetary policy since the beginning of 2007.
Despite high interest rate associated with Australian dollar, it failed to keep its positions on Forex after the rate change. Many traders saw a sign of instability in such a high rate and favored
AUD/USD fell from 0.9392 to 0.9292 today and AUD/JPY went down from 97.25 to 95.88.
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