Strong dollar dampens rate rise fears

The high Australian dollar looks set to spare home buyers from interest rate rises until later this year. Economists say the strong dollar is keeping inflation in check, which should be a key factor when the Reserve Bank considers monetary policy next month. Commonwealth Bank economist, Savanth Sebastian, said yesterday that a rate rise was unlikely until the second half of the year. ”For the average household a stronger Aussie could certainly be looked at as a friend rather than a foe,” he said.

”If it is keeping inflation low for longer the Reserve Bank won't have to raise rates as well.” The dollar has gained more than US20¢ since June. The global resources boom and high local interest rates have fuelled the swell. The dollar hit $US1 in November. The dollar reached a fresh high of $US1.0256 on New Year's Day before settling around $US1.0211 yesterday. Mr Sebastian said the dollar was expected to keep surging against the greenback until the end of the March quarter.

Source: Sydney Morning Herald