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RBA holds steady but strong employment data tempts fate

Despite leaving official interest rates unchanged at the February Reserve Bank board meeting, the Reserve Bank of Australia (RBA) inflation police will be on a heightened state of alert with the recent unemployment figures showing joblessness at a 31 year low.
Continued strength within the resource and service sectors will place capacity strains on an already tight labour market. And if this leads to sustained wage pressure, inflation may well shoot through the upper threshold of the RBA target of 2 - 3 per cent.
Whilst many interest rate watchers have now penciled in a relatively stable 2007 with no immediate changes anticipated, many have placed a labour market disclaimer to their predictions for 2007.



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