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Will RBA put the brake on rate hikes?

Posted by Tamara McDowell on April 28, 2010

Leading economists are predicting an extended pause on official interest rate rises as inflation pressures ease across the Australian economy.

An AAP survey of financial market economists shows that inflation is expected to rise just 0.7% for the quarter, putting the annual figure at 3%. This would be inside the RBA’s target band and well down from the peak of 4.7% 18 months ago.

Governor Glenn Stevens indicated that tomorrow’s release of the March quarter CPI figure would have a significant impact on the bank’s decisions over the next three months.

Reserve Bank of Australia Governor Glenn Stevens has told a business forum that inflation is now close to target and interest rates were falling back to normal levels.

“The Reserve Bank has moved early to raise the cash rate to levels that deliver interest rates for borrowers and depositors more like those that have been the average experience over the past 10 to 12 years,” Mr Stevens said in Toowoomba last week.

With interest rates now close to average, this may be a sign interest rate rises will cease, at least for now.

Access Economics warned, however, that inflation could build to 3.2% in 2011, driven by business activity and wage growth.

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