RBA puts interest rates on upward path

The Reserve Bank of Australia announced its third rate increase in as many months, hiking its cash rate by 25 bp to 3.75% as expected. The RBA noted in its press release that "global economy has resumed growth," and in China and much of Asia, the "recovery has been much quicker to date and prospects appear to be for good growth in 2010."

The downturn in Australia was relatively mild, and Australia's central bank was the first major central bank to begin reversing the monetary stimulus put in place.

Since the risk of a "serious contraction" has passed, per the RBA, monetary authorities have been gradually boosting rates.

An RBA surprise: Australia hikes key rate

The Reserve Bank of Australia became the first major central bank to increase interest rates amid signs the global economy is recovering, hiking its key lending rate by 25 bp to 3.25%.

The RBA said the "global economy is resuming growth," and "the recovery will likely continue during 2010 and forecasts are being revised higher." Despite doubts in some corners, the central bank noted that "growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets."

More rate increases seem likely as the RBA said, "It is now prudent to begin gradually lessening the stimulus provided by monetary policy." It seems extremely doubtful that Europe, the UK, or the US will follow suit anytime soon.

RBA turns more optimistic

The Reserve Bank of Australia held its key lending rate at 3.0% and noted that the global economy is resuming growth, and "growth in China has been very strong," which is having a significant impact on other economies in the region and on commodity markets.

The Board said the present accommodative setting of monetary policy remains "appropriate for the time being," but its increasingly optimistic tone suggests it may be setting the stage for a rate hike later in the year, in my view.

However, there was nothing explicit in its language that indicated a tightening is imminent.

RBA anticipates no more rate cuts

China expansion solid

The Reserve Bank of Australia signaled no more rate cuts will be forthcoming as it judged the current accommodative monetary policy is appropriate for now.

Looking down the road, the RBA said, "Movement towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge." In layman's terms, the bank is hinting at an eventual rate hike.

In its statement on monetary policy, the RBA said the global economy is stabilizing, while the pick-up in economic conditions is "most evident in China, where growth has been boosted by a large fiscal stimulus and increased bank lending."

There are fewer signs of recovery in the advanced economies, the RBA said, although the rate at which output is contracting has slowed noticeably. In the US, in particular, there is tentative evidence that the economy is reaching :a turning point," with the housing market showing signs of stabilization.

The key lending rate in Australia is currently at 3%.

RBA takes more optimistic view

The Reserve Bank of Australia held its key lending rate at 3.0% and issued an accompanying statement that said the "global economy is stabilizing...Growth in China has strengthened considerably, which is having an impact on other economies in the region, including Australia."

It also noted that downside risks to the outlook have diminished.

RBA is definitely becoming more upbeat about the economy, and its comments about China bode well for nearby countries, though Japan is still struggling.

Second quarter earnings season is upon us in the U.S., and I'll be interested in comments from multi-nationals that do business in China and any remarks they may offer regarding the outlook for the second half of the year.

Reserve Bank of Australia sees stabilization

The Reserve Bank of Australia (RBA) left its cash rate unchanged at a record low of 3% as expected. The RBA noted in its statement that evidence has continued to emerge that the global economy is stabilizing, after a sharp contraction during the December and March quarters.

Australia's central bank remarked that considerable policy stimulus in most countries is helping to contain the downturn, and should support an eventual recovery.

The turnaround is "clearest in China" and some emerging countries, the RBA said, but a recovery in the major countries is likely to take longer to begin and be slower when it does occur. Australia also indicated that credit remains tight and confidence is fragile but prospects are being helped by better conditions in global financial markets.

Monetary policy has been eased "significantly but the RBA did not rule out further rate cuts.

Central bankers in Australia have cut interest rates by 425 basis points (4.25 percentage points) since September in order to mitigate the impact of the global downturn. The country is dependent on commodities, and subsequently, has not been immune from the steep downturn in prices following over 15 years of an expanding economy.

The RBA also helped to confirm that China's economy is displaying signs of leading Asia out of the nastiest recession in decades. Australia has forged closer economic ties with China, which has been devouring much of the world's commodities in recent years.