Reserve happy with rates for now

Minutes from the Reserve Bank's March meeting suggest that borrowers are likely to be spared another rate rise when the board next meets on 1 April. While the bank expects that inflation could reach 4 per cent in the March quarter, well above the target band of 2 to 3 per cent, it believes that financial conditions have tightened considerably. The board believes that an official cash rate of 7.25 per cent has left it well placed to respond to any changes in economic growth and inflation. The minutes highlighted the opposing pressures facing the economy with financial markets in turmoil but commodity prices expected to soar further on the back of increased demand from China and Asia generally. Signs of slowing private demand are emerging but the bank expects that inflation could remain uncomfortably high but says that it should ease to under 3 per cent by 2010.

Source: The Australian Financial Review

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