House prices 'will drive RBA rate hike'

Friday 30 April 2010

Article by Mozo

Australia’s rapidly rising house prices are likely to prompt the Reserve Bank to raise official interest rates at its board meeting on Tuesday (May 4th), a commentator has observed.

David Uren, a finance columnist for the Australian, said that the continuing strength of house prices suggested that six interest rate increases since last October had still not cooled demand in the market.

He referred to the recent RP Data-Rismark index which showed that prices across the country’s capital cities rose by 1.1 per cent in March, with the annual increase now rising to 12.5 per cent

Mr Uren noted that the financial markets are currently putting the likelihood of a rate rise next week at just under 60 per cent, with the Greek-oriented, European debt crisis being cited as the main reason for possible caution by the Reserve Bank.

Meanwhile, a recent report by International Business Times noted that at its board meeting earlier this month, the RBA argued that it would be "prudent" to proceed with another interest rate hike.

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