by Wayne Cole
SydneyOctober 4 – The Australian Central Bank surprised the markets on Tuesday by raising interest rates by 25 basis points lower than expected, saying they have already risen significantly, although more rigors will be needed.
At the conclusion of its October monetary policy meeting, the Reserve Bank of Australia (RBAfor its abbreviation in English) raised its interest rate for a maximum of nine years, to 2.60%, which is the sixth increase in as many months, with four increases of 50 basis points.
The bank recently indicated the possibility of slowing the rate of growth at some point. But because of the Federal Reserve’s aggressive rate hike last month, markets were betting on a half-point hike this week.
“The interest rate on the spot has risen significantly in a very short period of time,” said the governor of RBAPhilip Lowe, in a statement.
“As a result, the Governing Council decided this month to increase the cash rate by 25 basis points as it assesses the outlook for inflation and economic growth in Australia,” it added. “The council expects to raise interest rates further in the future.”
Investors sent the local dollar down 0.8% at $0.6465, towards its recent 2 1/2-year low of $0.6364. [AU/INT]
Interest rate futures rallied on the market as a potential lower peak for rates, down from an earlier forecast of 4.0%, while three-year bond futures fell 42.5 points to 96,750.
“To drop a gear right now, while most of the world is still taking huge hikes, sends an important signal about the pace of future growth,” said Australian economics head Su-Lin Ong. RBC capital market.
“The question is now going to be zero or 25 for the next meetings.”
Markets have followed the example of foreign central banks, where increases of 75 or 100 basis points have become almost common.
However, Lowe cited the deteriorating outlook for the global economy as one of the main uncertainties, along with the response of Australian households to the sharp rise in borrowing costs.
($1 = 1.5442 Australian Dollar)