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RBA divided on rate rises

19/11/2009

Some economists are predicting that the Reserve Bank may pause its rate rising agenda in December and hold the official cash rate at 3.5 per cent.

Westpac says the minutes of the November RBA board meeting implied the RBA is considering not lifting rates again this year. But, says Westpac, "the economic case in our view is not strong enough to change our call that a December 25-basis point rate hike is likely".

The minutes reveal that the RBA is weighing up both sides of the argument:

"On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded," the minutes say.

But, on the other hand, "a lengthy period with interest rates at a very low level carried its own risks, particularly once the threat of serious economic weakness had passed".

Source: Courier Mail



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