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The Reserve Bank of Australia (RBA) hiked rates 3 times in 2010, raising them from 3% to 3.75%. The RBA is likely to continue its tightened monetary policy in February, raising rates to 4%. Economic data published in the last few weeks indicate that economic recovery is well under way in Australia. The more positive indication came from the labour market: in December, employment rose by 35.2k, three times more than economists had expected. Moreover, the consumer price index increased by 0.5 q/q in Q4 versus market expectations of 0.4% q/q, signalling that inflationary pressures may be higher than expected in the months ahead. With housing prices expected to trend upward in the next few months, the RBA may further tighten monetary policy in the months ahead.
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