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March 3, 2009

Australia holds rates at 3.25%

by Richard Kilner

Story link: Australia holds rates at 3.25%

The Reserve Bank of Australia has halted its recent policy of slashing interest rates, instead choosing to retain the present level of 3.25%.

Governor Glenn Stevens has released a press statement which asserts that the Australian economy has not contracted to the large extent seen by certain other economies and demand remains more robust in Australia than in other nations.

Governor Stevens has not indicated where the rates might go next time, simply stating that the Reserve Bank will assess its options at the proper time.

The interest rate is comparable to that in New Zealand (presently 3.5%), both of which are substantially higher than those in the eurozone (2%) and the UK (1%).

Since Q4 of last year many central banks embarked upon severe cutbacks to interest rates as inflationary dangers were seen to recede as commodity prices slumped.

In February the Reserve Bank slashed 100 basis points from Australia’s interest rate, however, it may (like the European Central Bank) have decided that the time has come, if not for a full stop to rate cuts, then for a pause to them.


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