The Reserve Bank of Australia has increased its interest rate to 6.5 percent, the highest level in 10 years. The quarter of a percent rate rise was announced this morning. "For some months, the Board has recognised that stronger economic conditions were likely to put upward pressure on inflation, notwithstanding some dampening influence from the higher exchange rate," said RBA governor Glenn Stevens in a prepared statement. "However, the high CPI outcome for the June quarter indicated a less favourable near-term outlook, with the implication that any further increases in inflation would take place from a higher starting point than previously envisaged. Based on these considerations, the Board judged that a somewhat more restrictive monetary policy setting was required in order to keep inflation consistent with the target in the medium term," he said.
In the foreign exchange, the Australian Dollar was worth 85.66 U.S. cents and 101.72 Japanese Yen, down from yesterday's close of 85.50 U.S. cents. Su-lin Ong, a senior economist from Rbc said the rate rise did not have a lasting impact on the currency because the rate rise was already largely factored into the market.
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