Tuesday, August 16, 2011

Reserve Bank's "prudent" decision to hold interest rates steady vindicated, board minutes show.

The minutes from the most recent meeting of the Reserve Bank board have highlighted how an interest rate rise was narrowly averted just days before the recent sharemarket mayhem began to unfold.
According to the minutes from the August 2 meeting, the central bank weighed up the risks of rising inflation in Australia before deciding it would be “prudent” to leave rates on hold because of the growing economic storm clouds over Europe and the United States.
With the benefit of hindsight, the members of Reserve Bank board are probably glad they took the “prudent” approach ahead of inflation fears given the events of the past fortnight.
Listen to my analysis from today's edition of The World Today.

Read more analysis from my ABC colleague Michael Janda.

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