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Investors expect higher rates

09/09/2010

Investors have reacted well to the Reserve Bank of Australia’s decision to leave official interest rates on hold at 4.5 per cent. The new Australian government has also been formed by Labor with the support of independents, providing certainty although with a mining tax attached. The dollar traded at above 91 cents yesterday.

"The next move in the cash rate, whenever that may be, will be up," said Roland Randall, an analyst at TD Securities. "This is not a 'neutral' stance, rather the RBA retains a tightening bias but has chosen to pause its policy tightening programme pending macroeconomic developments at home and abroad." Investors see Australian rates rising 11 basis points in the next year, up from a week ago when markets were pricing in rates falling 20 basis points.

Source: Sydney Morning Herald



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