AUSTRALIA

AUSTRALIA

GVI Reserve Bank of Australia Policy Meeting Preview Decision Anouncement: July 1, 2007 at 04:30 GMT. RBA Cash Rate Target: 7.25% No rate changes likely. Inflation continues to be a problem for the Reserve Bank. Nevertheless, officials have suggested that some softness might be developing in the economy. This suggests that rates have reached their cyclical peaks. Note in the chart below that the two RBA core price measures are testing the top end of the bank's allowable limit. The global economic slowdown and historic highs of AUD are likely to restrain the risk of future rate hikes. RESERVE BANK OF AUSTRALIA Policy Objective: The policy objective is a target for consumer price inflation, of 2-3 per cent per annum. Monetary policy aims to achieve this over the medium term and, subject to that, to encourage the strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy. The chart above shows year/year and the CPI target of 2% to 3% for this price index.

The chart above shows the current three month bank bill rate, the current Cash Rate target and where the futures markets are currently trading three month rates for the specified periods in the future. The chart also includes comparisons of where these futures rates were trading most recently, a week ago and four weeks ago. The chart provides a view on where the markets feel Australian interest rates are headed.

The chart above shows the Australian overnight rate target, three month bank bills, and two- and ten-year bond yields over the past twelve months.

Trading in the CAD had been volatile as the Bank of Canada was making aggressive rate cuts to keep pace with the Fed and to get ahead of a possible economic slowdown. No more rate reductions are in the pipeline.