Even Answers About Forex

Each month, excluding January, the Reserve Bank of Australia (RBA) Board meets to set the nation’s short term interest rate (i.e., “cash rate”). The Board announces the decided rate shortly after the meeting, and when there is a change in rates they also releases a statement that contains the economic conditions that effected their decision. A rising trend in interest rates has a positive effect on the nation’s currency. Short term rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency. The decision on where to set interest rates depends mostly on inflation. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 3%, they will respond by raising interest rates in an attempt to bring prices down.

The Reserve Bank of Australia (RBA) will announce their decision on their interest rate at 2330 GMT on 03-July, which incidentally would be 04-July in Australia. The last time, they had changed rates was in November 2006, when they had raised the interest rates by 25 bps to 6.25%.

RBA is expected to keep the rates unchanged this time at 6.25%. This would be their sixth pause in the year 2007 and the seventh pause since their last hike back in Nov-06. In Australia the CPI number comes out quarterly and hence the RBA does not have any more fresh inflation data on hand since their last meeting to evaluate the new emerging trends in the economy.

Interest Rate Statement

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