Official Interest Rate Bulletin PO Box 741 Rozelle NSW 2039 Tel: 1300 885 559 Mob: 0405 534 344 Fax: 1300 885 559 Email: info@sydneymortgagepractice.com.au Web: www.sydneymortgagepractice.com.au CANCELLED Kinross Director RBA Increases Official Cash Rate At its meeting today, the Reserve Bank Board decided to increase the cash rate target by 25 basis points, to 7.25 per cent, effective 5 March 2008. If you have any questions about this change to interest rates, or would like to review your current finance & loan arrangements, please contact our office. Statement by Glenn Stevens, Governor Monetary Policy RBA This adjustment was made in order to contain and reduce inflation over the medium term. Inflation was high in 2007, with an annual CPI increase of 3 per cent in the December quarter and underlying measures around 3 1/2 per cent. Domestic demand grew at rates appreciably higher than the growth of the economy's productive capacity over the year. Labour market conditions remained strong into early 2008 and reports of high capacity usage and shortages of suitable labour persist. Inflation is likely to remain relatively high in the short term, and will probably rise further in year ended terms, before moderating next year in response to slower growth in demand. The Board took account of events abroad and developments in financial markets. The world economy is slowing and it appears likely that global growth will be below trend in 2008. Recent trends in world commodity markets, however, have further strengthened prospects for Australia's terms of trade. Sentiment in global financial markets remains fragile. Australian financial intermediaries are experiencing increases in funding costs, which are being passed on to customers. Some tightening in credit standards for more risky borrowers is occurring. There is tentative evidence that some moderation in household demand is beginning to occur, with business and consumer sentiment softer recently, and household credit demand slowing somewhat. The extent of that moderation is uncertain, however. As the Board noted last month, a significant slowing in demand from its pace of last year is likely to be necessary to reduce inflation over time. Having weighed both the international and domestic information available, the Board concluded that a further tightening in monetary policy was needed to secure an inflation rate of 2 to 3 per cent over time. As a result of this and earlier actions, and rises in borrowing costs which are occurring independently of changes in the cash rate, the overall tightening in financial conditions since the middle of 2007 is substantial. The Board will continue to evaluate prospects for economic activity and inflation in the light of new information. Disclaimer Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2009.