Unemployment rise makes rate hike unlikely

Thursday 12 August 2010

Article by Mozo

A leading economist has predicted that official interest rates will stay on hold until next year following new unemployment and inflation trend data.

Australian Bureau of Statistics figures show that the unemployment rate rose unexpectedly to 5.3 per cent in July from a steady 5.1 per cent in May and June as more people looked for work.

Commenting on the data, Macquarie interest rate strategist Rory Robertson said: "The cash rate probably will be left unchanged at 4.5 per cent into 2011 because trend inflation is falling neatly back into the [Reserve Bank's] 2-3 per cent band."

BusinessDay and the AAP also reported that business confidence slumped to a 14-month low in July, with retail sales remaining soft and the housing sector cooling as auction clearance rates fell and new home loans dropped to a nine-year low in June.

According to its latest quarterly statement of monetary policy, the RBA expects Australia's economy to have reached growth of four per cent for the year by December 2012.

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