Reserve Bank of Australia Forecast Stable Rates

Marcus Jacob
11 Feb, 2011
New York City

Sydney benchmark index declined 0.7% and the RBA governor assured Australian lawmakers that rates are not expected to change for sometime. Governor Glenn Stevens also noted that food price increase is temporary and said higher commodities prices will fuel larger surge in domestic income.

[R]5:30 PM Sydney – Sydney benchmark index declined 0.7% and the RBA governor assured Australian lawmakers that rates are not expected to change for sometime. Governor Glenn Stevens also noted that food price increase is temporary and said higher commodities prices will fuel larger surge in domestic income.[/R]

Stocks in Sydney trading declined as commodities prices hovered near the recent peaks and the RBA governor Stevens said rates not likely to change for some time.

The ASX 200 index declined 33.5 or 0.7% to 4,880.90 and the All Ordinaries index fell 31.10 or 0.6% to 4,970.60.

The Australian dollar edged lower to US$0.9968.

Reserve Bank of Australia governor Glenn Stevens said interest rates are likely to remain unchanged till the second half of the year. In a testimony to parliament he stressed that the central bank is “ahead of the game” and he is comfortable with the assumption that the rate won’t change for some time.

Investors are expecting the next rate rise in November after the central bank lifted rates seven times in since late 2009.

Food prices have shot up in the recent months and he added that the price increase is temporary.

He also said that country’s terms of trade in the international markets are at 60-year high and are expected to peak at a higher level and not for some time.

Stock Movers

Rio Tinto declined 1.6% or $1.40 to close at $87.28 after reporting profit nearly tripled and said it will lower its debt and buy back US$5 billion of share. Investors in London and New York sold shares deeming the share repurchase inadequate.

BHP Billiton declined 38 cents to $46.38 and Newcrest Mining fell 54 cents or 1.4% to $37.16.

Banks closed lower after rising fractionally in the early trading. ANZ fell 19 cents to $24.91 and Westpac declined 18 cents to $24.06. National Australia Bank dropped 25 cents to $25.69 and Commonwealth Bank fell 48 cents to $55.12.

Telstra increased 3 cents to $2.91 and traded 117 million shares.

Fletcher Building edged 1 cent lower to $6.20 after the competition authorities approved the purchase of Crane Group for $797 million.

Qantas declined 3 cents to $2.39 after the airline increased domestic ticket prices and pass on higher fuel charges.

Harvey Norman declined 5 cents to $2.92 after the retailer reported flat second quarter sales.