The Reserve Bank of Australia yesterday decided to continue lessening the degree of monetary stimulus it had put in place, while, at the same time, the Bank of Japan looks likely take further steps to support the Japanese economy.
The RBA lifted its official interest rate by 0.25% to 3.75%, effective from today.
The move will add around $A47 ($NZ57.82) a month to repayments on an average $300,000 mortgage, assuming retail banks match the move.
In Japan, the yen fell sharply after the Bank of Japan said it would hold an extraordinary policy meeting, with the market speculating it was readying to take steps to support the economy.
A return of the Bank of Japan's narrow form of quantitative easing, in which it flooded the financial system with cash, has so far seemed unlikely, because those inside the bank do not think the policy adopted between 2001 and 2006 was effective.
Reserve Bank of Australia governor Glenn Stevens said in a statement with the risk of serious economic contraction in Australia having passed, the board had moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker.
"The global economy has resumed growth. With economic policies remaining expansionary, growth is likely to continue next year, though it will probably be modest in the major countries due to the continuing legacy of the financial crisis."
In China and Asia generally, where financial sectors were not impaired, recovery had been much quicker to date and prospects appeared to be for good growth next year, he said.
Financial markets had improved considerably during the year and capital flows into Asia and other emerging market regions had been picking up.
In Australia, the downturn was "relatively mild", and measures of confidence and business conditions suggested the economy was in gradual recovery, Mr Stevens said.
The effects of the early stages of the fiscal stimulus on consumer demand were fading, but public infrastructure spending was starting to provide more impetus to demand.
Prospects for ongoing expansion of private demand, including business investment, had been strengthening, he said.
There had been some early signs of an improvement in labour market conditions.
The rate of unemployment was now likely to peak at a considerably lower level than earlier expected.
Mr Stevens said inflation had declined from its peak last year.
In underlying terms, inflation should continue to moderate in the near term, although it would probably not fall as far as thought likely six months ago.
Consumer price index inflation on a year-ending basis had been unusually low because of temporary factors and would probably rise in the coming year.
Both CPI and underlying inflation were expected to be consistent with the target in 2010, he said.
At a glance
- Reserve Bank of Australia - 3.75% central interest rate
- Reserve Bank of NZ - 2.5% official cash rate
- Next OCR decision - December 10
- Bank of Japan - 0.1% central interest rate
