The Reserve Bank of Australia (RBA) has raised its inflation forecasts to its highest range while stating that economic growth will increase. This has come only a week after the RBA increased its interest rates to 6.5 percent, an eleven year high. Core Inflation will speed up to three percent by the end of this year, the RBA said in a quarterly policy statement released today. ''This is tough talking on the inflation front,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia, the nation's second-largest lender by assets. ''Interest rates will go up in the early part of next year.'' The Australian economy is currently in its 16th year of economic growth and still going strong with a rise in jobs with rising incomes fueling consumption. The jobless rate is 4.3 percent, close to the lowest in 33 years, and business and household confidence are near record highs. The jobless rate is 4.3 percent, close to the lowest in 33 years, and business and household confidence are hitting near record highs. Global economic growth has ''remained strong,'' Australia's central bank said. ''It will remain important to keep a close watch on both domestic inflation risks and any further developments in international financial markets.''
In the foreign exchange, the Australian Dollar rose the most out of any currency on expectations of another interest rate rise by the end of this year. Against the U.S. Dollar, the Australian Dollar advanced to 84.87 U.S. cents in Sydney this afternoon compared to 84.68 U.S. cents before the statement. The currency traded at 100.16 Japanese Yen compared to last weeks 99.96 Yen. Australia's dollar hit an 18-year high of 88.71 cents on July 25 after the CPI rose 2.1 percent in the quarter from a year earlier, more than the central bank's May forecast of 1.75 percent.
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