At its November meeting, the Reserve Bank of Australia (RBA) lifted interest rates by 0.25% from 6.50% to 6.75%, The Reserve Bank’s rationale for the increase is to slow aggregate demand and maintain inflation within the Reserve Bank’s target band of 2-3% in the medium term.

A rate rise at their February meeting has been factored in after the RBA gauges the extent of the US downturn and market conditions as well as the fourth quarter Consumer Price Index (CPI) figures released in January.

The unemployment rate released decreased by 0.1% to 4.2% the lowest record in 32 years and the participation rate was steady at 65.0%.

The CPI figures released indicated an underlying CPI figure of 0.9%, indicating inflation is higher than the RBA anticipated and is already at the top of its 2-3% target.  Overall, the economy is strong with a positive outlook.
 The Australian Dollar has been buoyed by the continued strength in commodity prices and gained momentum performing strongly against most currencies. It is trading close to the 0.90 cent US level and around the 0.6100-cent level against the Euro.

Oil prices are trading just above USD 92 per barrel. Gold is trading around US$780.

Laiki Bank - www.laikibank.com.au

Source: Reuters, Dow Jones

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