Rate rise on stand by

Free market rate rises are doing the inflation busting trick for the Reserve Bank of Australia for the time being, or so the board of the Reserve Bank of Australia judged at its meeting two weeks ago.

And should market rates for some reason resemble the manipulated cash rate targeted by the RBA, then the manipulated rate is almost certain to rise in the early months of 2008.

Minutes of the RBA board meeting for December show that the decision to leave the cash rate target was "finely balanced" and that "there would have been a strong case on domestic grounds for a rise in the cash rate at this meeting".

The decisive factor was the increase in market yields that pushed up most borrowing costs for business and also some costs for households in recent months. An additional rise in the cash rate this month would have "resulted in quite a significant tightening of overall financial conditions over a short period".