insto - Australian financial markets

 Reserve Bank of Australia Governor Glenn Stevens has suggested the central bank’s cash rate could rise by up to 1 percentage point in the months ahead to best manage the economy’s inflationary pressures.

RBA raised the cash rate by 25 basis points to 3.75 per cent, effective 2 December 2009. Thjs is the third consecutive month for an interest rate increase– the first time it has ever lifted rates three months in a row. Rates had stood at a 49-year low of 3.00 per cent before the decision in October to lift the cash rate.

“The global economy… growth is likely to continue next year, though it will probably be modest in the major countries,” said RBA in a statement. “Growth in 2010 is likely to be close to trend and inflation close to target.”

The focus by owners and investors on portfolio restructuring and debt rollover for the first three quarters of the year will continue to be an issue for the listed sector, particularly smaller AREITs.

The Australian commercial property market is starting to recover from the property downturn, but it will be a slow process, with 2010 characterised as a year of consolidation.

The startling race towards parity by the Australian dollar against the US dollar demonstrates the importance of commodity prices on currency rates, writes Bernard Kellerman.

By mid-October, the AUD/USD rate had climbed to a 14 and a half month high - somewhere above 0.9300. This meant the AUD had risen by more than US5 cents since the RBA first raised official interest rates by 25bps on October 6.

Following the decision of NSW TCorp to access the Commonealth’s state guarantee programme for bonds of three to fifteen year maturity, TCorp has confirmed that the RBA has issued eligibility certificates for the following benchmark bonds, with effect 16 September 2009.

• 5.25 per cent 1 May 2013
• 5.5 per cent 1 August 2014
• 5.5 per cent 1 March 2017
• 6.0 per cent 1 April 2019
• 6.0 per cent 1 May 2023

While global regulators have made the world a safer place, they're keeping some awake at night.

At its meeting on Tuesday, the Reserve Bank of Australia’s board decided to leave the cash rate unchanged at 3.0 per cent.

The brief statement from the RBA’s governor Glenn Stevens pointed out that there were hopeful signs that the worst was over, with downside risks to the global economic outlook “diminished”, before concluding: “The Board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances. The Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target.”

Later today the Reserve Bank of Australia’s Board will announce their decision on cash rates. This month is expected to be yet another “steady as she goes” decision, with most pundits in lock-step that interest rates will remain at 49-year lows at least for September - all 17 economists polled by Bloomberg agreed rates will stay on hold.

While the vulture funds of yesteryear hover hopefully above troubled companies, a new breed of investor may beat them to the punch, writes Alexandra Cain.

On Friday 14 August, the Reserve Bank of Australia’s Governor Glenn Stevens delivered what one commentator characterised as “his semi-annual download to the House of Reps Standing Committee on Economics”.

As Michael Blythe, the Commonwealth Bank of Australia’s chief economist noted, the RBA has had plenty of opportunity to make its views known over the past few weeks via speeches, post Board meeting announcements and last week’s quarterly Statement on Monetary Policy. The Governor’s comments followed the themes that emerged in its earlier reports:

• the global backdrop looks “distinctly better” than it did three months ago;
• domestic activity is “looking stronger” than it did three months ago;
• the current recession “may be one of the shallower recessions Australia has experienced”;
• at some point the Bank will have to start moving interest rates back to “normal” levels.