Australia’s overnight cash rate the Federal Reserve announced it will increase by 25 basis points to 4.75%, starting from November 3 to take effect. India’s Central Bank announced its benchmark borrowing (repo rate) and lending rates (reverse repo rate) were raised by 25 basis points to 6.25% and 5.25%.

This is the Reserve Bank of Australia since October 2009 the 7th since the rate hike, but it is the last 6 months of the first interest rate increase. India central bank is the sixth time this year, raised the benchmark interest rate. Behind a series of rate hikes, the central bank between the two countries to further rise of future inflation expectations.
Australia, a sudden rate hike

2, Australia’s central bank raised its benchmark interest rate published on the website by 25 basis points to 4.75% on the grounds that “expectations of future inflation allowed the central bank committee reached the same conclusion, through to early, appropriate and prudent monetary policy to quell inflation risk” .

“Economic expansion in the trade subject to high import ratio and a relatively modest impact of surplus capital. Although inflation is now good, but look to the future, medium-term inflation risks remain. At today’s meeting, the Committee agreed that In order to calm the risk, need to take early, appropriate and prudent monetary policy. “Glenn Stevens said the Australian central bank officials.

Australia’s central bank forecasts, inflation declined the past two years have been fast drawing to a close, the current underlying inflation of approximately 2.5%.

And India continue to raise interest rates different from the RBA over the past 5 months no interest rate increase, Glenn Stevens explained: “In a period of time, the Committee to maintain monetary stability, so that lending rates close to the average of the past decade. It allows the Commission to win some time to look at the results of past policy changes, simultaneous detection of uncertain international situation. ”

“The market interest rate shock.” Asia’s interest rate strategy at Nomura Securities Research Fellow Des Supple said, “the central bank in Australia to make this declaration, we are expected to raise rates by 25 basis points may be only 30%.”

Reserve Bank of Australia called for “that deceleration of inflation in the past two years is almost coming to an end”, Des Supple agreed to balance the weighted CPI price index for Q1 2001 2005 Q4 2010 Q3 are the lowest point in history This was mainly because Asian demand for imported goods to Australia. As expected the world economy, India’s central bank felt the risk of coming to “early, moderate and prudent monetary policy.”

However, Des Supple believes that the move does not mean that the Australian central bank will continue a long-term tightening cycle, while the Basel III will lead the banks to reduce this possibility. “If the Australian banks to raise lending rates to 25 basis points above the expected future long-term maintenance to reduce the possibility of tightening policy.”

India, the expected

Relative to the Reserve Bank of Australia “surprise” interest rate increase, the Indian central bank’s base rate increases in line with market expectations. Research Center of Nomura Securities chief economist in India Sonal Varma told reporters, “India’s central bank to raise interest rates in agreement with the public, but with time we expect to raise interest rates to stop the expectations are different. The statutory reserve ratio kept unchanged at 6%. Unlike the past two quarters. ”

India’s central bank said the rate hike was mainly due to three factors. “First, the driving force of growth in the domestic economy remains strong, will help absorb the slowdown in global economic recovery, most negative effects. Second, regardless of the supply side or demand side, inflation or inflation expectations remain very high. Taking into account inflation spread and persistent demand of the inflationary pressures need to be contained, inflation expectations and needs stability. Finally, even if the fight against inflation, liquidity will have a deficit, inflation still needs to be reasonable restrictions to ensure that economic activity is not destroyed. ”

Sonal Varma believes that the Indian central bank’s main concern over the general inflation is now more concerned with the structural food inflation and asset prices. In order to control asset prices, India’s central bank adopted a tightening standards, such as mortgage rates not exceeding 80% and so on.

“In India the central bank’s decision-making basis, to maintain a growth rate of real GDP estimate of 8.5%, but the WPI (wholesale price index) inflation forecast of 6% from the previous adjusted to 5.5%. Nevertheless, the inflation rate is still in the Reserve Bank of India more than tolerable range, and short-term domestic inflation expectations (household inflation) is rising, while the central bank hopes to maintain a moderate. “Sonal Varma said.

Consequences for the rate hike, the Indian central bank raised a few hopes, first, the recent consolidation of the anti-inflationary monetary policy, even if there is continuous inflation crisis. Secondly, the control because of rising food prices because of inflation expectations rise. Finally, the “moderate to not undermine growth.”

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