Australia's central bank dampened expectations for further rate hikes Tuesday, saying it was in a suitably "flexible" position following three successive increases in three months. The Reserve Bank of Australia (RBA) said economic growth in 2009 had turned out to be "materially stronger than had been expected earlier in the year", and the effects of the global downturn were much milder than had been feared.
Looking forward, the RBA said growth prospects were strengthening, particularly in the heavily invested resources sector, yet interest rates remained "noticeably below normal." "The question was whether it was more appropriate to take a further step at this meeting or to hold the cash rate steady pending a further evaluation of developments," the RBA said, releasing the minutes of its December 2 meeting.
"Members saw the arguments as finely balanced, but concluded that the stance of monetary policy would best reflect the circumstances facing the economy over the period ahead if there were an increase in the cash rate of 25 basis points at this meeting." The unprecedented 25 basis-point rate increase for a third month running to 3.75 percent was "materially shifting" and had increased the RBA's future flexibility, it added, dampening expectations of a February rise.