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To: TATRADER who wrote (44485)	11/2/1999 6:33:00 PM
From: Julian	Read Replies (1) \| Respond to of 116761

Top Financial News Tue, 02 Nov 1999, 6:29pm EST Australia's Central Bank Boosts Key Rate to 5%; First Rise in Five Years By Michael Collins with reporting by Brett Cole Australia's Central Bank Boosts Key Rate to 5.00% (Update1) (adds market reaction; investor comment and details in 4th paragraph through end) Sydney, Nov. 3 (Bloomberg) -- Australia's central bank raised its key rate for the first time in five years in a pre- emptive move to ensure inflation stays within its 2 percent-to-3 percent band. The Reserve Bank of Australia boosted its overnight cash rate target, the rate banks charge each other for overnight loans, to 5.00 percent from 4.75 percent. This reverses the bank's last cut Dec. 2 last year, when it cut rates by a quarter point. It is the first increase since December 1994. ''The need for such an expansionary setting has now passed,'' Governor Ian Macfarlane said in a statement. ''Some further gradual increase in inflation is likely over the next two or three quarters.'' The Australian dollar fell against the U.S. dollar after the 9:30 a.m. Sydney announcement. It dropped to 63.94 U.S. cents compared with 64.17 U.S. cents before the bank's increase. The benchmark 10-year government bond yield rose 1 basis point to 6.56 percent. The rate increase will boost the cost of borrowing for consumers and businesses as commercial banks are expected to follow with their own interest rate increases. That should slow spending and investment to cool economic growth and help stem any threat of faster inflation. ''The Australian economy is growing faster than the Bank or most other forecasters had expected,'' Macfarlane said, referring to an advance in gross domestic product of 4.4 percent in the year through June 30. ''Global growth this year has been a good deal stronger than expected, and a further strengthening appears likely in 2000.'' ''This adjustment will not bring to an end the current expansion, now in its ninth year, nor is it designed to do so,'' the statement said. Analysts said they expected today's tightening to be the first of a series of future increases in Australia's interest rates. ''I see them increasing rates a couple of times in the new year,'' said Marion Kraemer, who helps manage A$1.6 billion in fixed income securities at Perpetual Investments in Sydney. In the three months ended Sept. 30, the central bank said Australia's core inflation increased ''a little over 2 percent over the year.'' ''Some further gradual increase in inflation is likely over the next two or three quarters,'' it warned.