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(Recasts to a tighter policy view)

The Reserve Bank of Australia has dropped language that it is "prepared to be patient" in its latest outlook on interest rates, signalling a more hawkish view, as it avoided any comment on the economic impacts of last week’s federal budget, which included around AUD8.6 billion in spending as the Liberal led coalition heads for a tight election in May.

As expected, the RBA kept interest rates on hold at the record low of 0.10% on Tuesday. But the statement noted higher inflation and labour conditions with unemployment likely to fall below 4.% this year to a 50-year record, indirectly suggesting earlier timeframes for a rate hike .

"Over coming months, important additional evidence will be available to the Board on both inflation and the evolution of labour costs," the RBA said. "The Board will assess this and other incoming information as its sets policy to support full employment in Australia and inflation outcomes consistent with the target."

NO BUDGET TALK

The RBA’s statement did not mention last week’s budget, which many economists expect to add to inflation pressure, but said updated forecasts would be included in May's Statement on Monetary Policy.

The RBA noted an increase in the Australian dollar exchange rate, up from USD0.72 cents at the beginning of the year to USD0.76 cents this week as a result of higher commodity prices.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com

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