Monday, February 1, 2010

Australian Inflation Jumps: Rates Set To Rise Further, FXA ETF

Australias' Reserve Bank board meets on Tuesday February 2 to set the official cash rate target. Concerns are growing that the rate may rise even further as an unofficial measure of inflation had its biggest monthly increase in a year.

The TD Securities - Melbourne Institute Inflation Gauge rose by 0.8% last month, and the annual inflation rate rose to 2.6%.

The ETF that tracks the Australian dollar is FXA. We track all currency ETFs live here.

ABC News says that the steep rise in January was caused mainly by increases in the cost of travel, accommodation, utilities and education.

"TD Securities says the survey results, combined with last week's slightly higher than expected official inflation result for the December quarter, builds a strong case for the Reserve Bank to raise interest rates again at tomorrow's board meeting.

"It certainly almost guarantees a 25 basis point increase tomorrow to [an official cash rate of] 4 per cent," she told the ABC's business editor Peter Ryan.

"At this stage however, we're not looking for another follow up in March, unless we see maybe another very strong employment report or similar numbers like today which show that all the pressures are on the upside."

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