The Reserve Bank of Australia raised its official interest rate again on Tuesday, as most economists expected. Bloomberg reports:
Australia raised its benchmark interest rate by a quarter percentage point for the second straight month, becoming the only nation to increase borrowing costs twice this year as the global economy recovers.
Reserve Bank Governor Glenn Stevens lifted the overnight cash rate target to 3.5 percent in Sydney today, as forecast by 18 of 22 economists surveyed by Bloomberg News. The rest expected a half-point move.
Australia’s dollar and bond yields fell as traders reduced bets on an increase in December after Stevens said higher rates would come “gradually.” Rising consumer confidence and Chinese demand for iron ore and coal will stoke economic growth while the currency’s 29 percent gain this year may hurt exporters and curb inflation, he said.
Today's economic reports from Australia tempered expectations of further rate hikes. The Age reports:
Retail sales fell by a surprising 0.2 per cent in September, reducing the chances of another rise next month in official interest rates. Building approvals, though, came in slightly higher than forecast.
The seasonally adjusted drop followed a revised 0.7 per cent increase in August, official data out today show. Analysts had expected a 0.5 per cent increase.
Probably more important for the global economy and investors, though, is the monetary policy decision by the Federal Reserve later today. Despite additional signs of economic recovery in the US on Tuesday in the form of a 0.9 percent rise in factory orders in September, the Fed is expected to keep interest rates unchanged.