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Reserve Bank of Australia decision on percent rate

Today early in the morning Bank of Australia left percent rate unchanged at the level of 4,75%. Central Bank in comments to this decision have noted several tendencies in world economy. On the one side, debt problems of some European countries again has become in the focus. From the other side, economies of such countries as China and India continue to rise by steady paces and USA economy shows moderate recovery.

There is also ambiguity in the Australian economy. Inflation rates in 2010 Q3 in yoy terms decreased from 3,1% to 2,8%. Rates of real GDP rise in 2010 Q3 also declined by 0,4% to 2,7%, that indicates the slowing of economy increase. There is also a stagnation in spending and borrowing, that have got the opportunity to growth of population saving rate. From the opposite side, retail turnover is at the highest level since 1950s.  Private investment have began to rise. Employment and average wage are rising by sustainable rates.

Reserve Bank of Australia also focused on significant increase of exchange rate of Australian dollar, that have risen by 10,95% since the beginning of 2010. It was mainly caused by high level of commodity prices and soft monetary policy in Australia and other countries. It will constrain inflation pressure throughout several quarters. Over the medium term the inflation rates are expected to rise if the economy grows as anticipated.

Taking into account previous increase of percent rate on 2 November by 0,25% lending rates in the economy have become  a little more than average. It will delay further increase of percent rate by several months.  

The general mood of Central Bank comments to this decision was moderately positive, that reflected in dynamics of Australian dollar. After release of this news national currency has grown by 0,4%.  Our Australia GDP forecast for 2010 is 2,8-2,9% and more than 3% for 2011. That will support Australian dollar for the medium term. In our opinion, in the short term Australian dollar can reach the levels of 1,0050-1,0100.