Tuesday, February 1, 2011

Australia c.bank holds rates, looks beyond floods

SYDNEY: Australia's central bank kept its key cash rate unchanged at 4.75 percent on Tuesday, Feb 1 saying the impact of flood damage in Queensland would be temporary and it was still very much focused on the medium-term outlook for solid growth.

The Australian dollar (AUD=D4) held firm atop parity after the Reserve Bank of Australia (RBA) ended its monthly policy meeting with a generally upbeat assessment of the domestic and global economy.

The central bank has led the developed world in hiking 175 basis points since late 2009, a pre-emptive policy that helped slow underlying inflation to a decade-low last quarter.

"The medium-term story still seems to remain intact, with a positive boost from commodities, the Asia story, and some of the inflation risks that go with that," said Michael Blythe, chief economist at Commonwealth Bank.

"As the RBA points out it's the medium-term projection that will drive the interest rate story over time and while floods and the like may affect the near-term timing, they probably don't affect the end point for rates -- it still seems to be a tightening bias in place." - Reuters


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