RBA raises interest rate

The Reserve Bank of Australia raised interest rates on Tuesday. Bloomberg reports:

Australia’s central bank resumed raising interest rates after a one-meeting pause, judging that faster-than-anticipated economic growth will allay concerns that European deficits may roil global confidence.

Reserve Bank of Australia Governor Glenn Stevens increased the benchmark overnight cash rate target to 4 percent from 3.75 percent in Sydney today, as forecast by 14 of 19 economists in a Bloomberg News survey. The rest saw no change. Stevens said rates should be closer to “average,” which he last week signaled may be 75 basis points higher than today’s new level...

The announcement came hours after the government reported retail sales climbed 1.2 percent in January from December, exceeding the forecasts of all 19 economists in a Bloomberg News survey. A separate report showed home-building approvals fell in January, affected by the Reserve Bank’s rate increases and a reduction in government grants to first-time buyers.

The Bank of Canada, though, left rates unchanged. Bloomberg reports:

The Bank of Canada kept its benchmark interest rate at a record low today, and said that inflation and economic output have been higher than policy makers expected, signaling rate increases in coming months.

The target rate for overnight loans between commercial banks remained at 0.25 percent, where it’s been since April, as predicted by all 22 economists surveyed by Bloomberg. The bank also repeated a pledge to leave it unchanged through June unless the “current” inflation outlook shifts.

Low inflation in the euro area means that interest rates are also not expected to be raised by the ECB soon. From Bloomberg:

European inflation slowed in February after rising unemployment and a weakening recovery prompted households to scale back spending.

Consumer prices in the 16-nation euro region rose an estimated 0.9 percent from a year earlier after increasing 1 percent in January, the European Union statistics office in Luxembourg said today. Producer prices fell 1 percent in January from a year earlier, the smallest decline in a year, the statistics office said in a separate report.

There will also be no rate increases soon in Japan, despite continuing signs of recovery. From AFP/CNA:

Japan's jobless rate slipped back below five per cent in January, data showed Tuesday, but the government voiced concern that Toyota's recall crisis and deflation could threaten the export-led recovery...

Unemployment fell to a better-than-expected 4.9 per cent from a revised 5.2 per cent the previous month, Tokyo said, while a separate report said there were 46 job offers for every 100 job seekers, up from 43 in December...

Average household spending rose 1.7 per cent in January from a year earlier but that was down from 2.1 per cent in December, while the average monthly income of salaried households fell 0.5 per cent in real terms.

In fact, more fiscal stimulus could be on the way for Japan. Again from AFP/CNA:

Japan's lower house on Tuesday passed a record trillion-dollar budget for fiscal 2010, adding to the country's bulging public debt burden as Tokyo tries to stimulate a sluggish economic recovery.

The 92.3 trillion yen (1.0 trillion dollar) budget includes new child-care allowances, free public high school tuition and other measures promised by the centre-left government that took power in September.