The Australian central bank has kept its cash rate at 3.75 per cent, after three consecutive monthly rises, signalling concerns about the strength of the recovery. The Aussie dollar slid 1.4 per cent against both the dollar and the yen on the news.
The move was unexpected, though markets beat economists in being less surprised. All economists polled by Reuters expected a 25bp increase in the Australian cash rate, to 4 per cent. Traders were more cautious, factoring in a 70 per cent chance of increase.
Mixed data is coming out of Australia, with house prices rising but job vacancy listings falling sharply.
Matthew Johnson, an interest-rate strategist at UBS AG in Sydney, told Bloomberg: “The overarching message from the Reserve Bank of Australia is that while things are better than we thought, we’re not out of the woods just yet.” Nouriel Roubini will be disappointed: he thinks Norway, Australia and Israel should be more concerned by inflation than by growth.
