Australia holds interest rate at 4.25%

Australia’s central bank unexpectedly kept its benchmark interest rate unchanged as it assesses the effect on the nation’s economy of its two previous cuts.

Governor Glenn Stevens and his board left the overnight cash-rate target at 4.25 percent, the Reserve Bank of Australia said in a statement in Sydney Tuesday. The decision was predicted by three of 27 economists surveyed by Bloomberg News. The other 24 forecast a quarter percentage-point reduction.

Stevens’s decision reflects confidence the U.S. and Chinese economies will withstand a European recession and domestic unemployment stay close to 5 percent as A$456 billion ($488 billion) in resource projects boost hiring. Australia’s services industry expanded in January, snapping three straight months of declines, and manufacturing advanced for a second consecutive month.

“The global risks are a little lower than at the time of the December rate cut,” Australia & New Zealand Banking Group Ltd. economists Craig Michaels and Katie Dean, who predicted a pause, said in a research report before Tuesday’s decision. “The domestic data flow since the last RBA board meeting indicates that economic conditions are broadly unchanged.”

The Australian dollar, the world’s fifth-most traded currency, has strengthened about 5 percent this year. The currency touched a six-month high of $1.0794 on Feb. 3 after reports showed employment in the U.S. topped forecasts, sending its jobless rate to a three-year low, and global manufacturing is strengthening.

Stevens lowered the nation’s benchmark interest rate by a quarter percentage point to 4.5 percent on Nov. 1 and to 4.25 percent Dec. 6 to help revive household demand and hiring. (Bloomberg)







The RBA expects that Chinese demand for the nation’s commodities will help propel the domestic economy even as a global expansion slows.

Australia’s trade surplus soared to a record in 2011 on coal and iron ore shipments, a Feb. 2 government report showed, as exports outpaced imports by A$19.3 billion.

Demand for Australian resources and interest rates that were 2.25 percentage points higher than any other developed nation spurred the Australian dollar to $1.1081 on July 27, the highest level since it was freely floated in 1983. (Bloomberg)



caption; Glenn Stevens, governor of the Reserve Bank of Australia Bloomberg