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Currency Thoughts:
Sizzling Economy Left On Hold
The labor market has sizzled, and net household wealth has improved in Australia, says Larry Greenberg of CurrencyThoughts.com. Catch Larry, and TheLFB trade team on ForexTV Live.
The Reserve Bank of Australia cash rate was somewhat unexpectedly left at 3.75%, but the statement from officials noted that “if economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.”
The statement observes that borrowing rates have climbed already about 100 basis points, more than the cash rate’s cumulative 75-bp advance since end-September, and officials apparently wish to see how the economy responds to the increase in rates rather than tighten additionally at this time.
Policymakers may have been deterred by today’s sharp reported 11-point drop to +8 in business confidence last month from +19 in November, +16 in October, +14 in September and +18 in August.
Business conditions, which remained at +10 last month, remain good, however. The labor market has sizzled, and net household wealth has improved. Residential construction, resource-sector investment, and public spending on infrastructure are each lending the economy support in addition to private consumption.
Large firms are getting the financing help they need, but credit conditions for smaller firms remain more problematic. Full Article...