Fed: Dollar collapse increases pressure on rate

AAP General News (Australia)
02-01-2000
Fed: Dollar collapse increases pressure on rate

Interest rates are set to rise again, with economists warning of another collapse in
the Australian dollar if the Reserve Bank Board fails to act when it meets today.

Economists are unanimous in predicting that a second rise in rates in three months
will be announced tomorrow (Wed).

They are only divided over whether it will be a half or a quarter per cent.

Last week's lower-than-expected annual inflation rate of 1.8 per cent has had many
choosing the lower figure, with business leaders questioning why a rise is needed at all.

But that was before the Australian dollar plummeted three US cents in 16 hours on the
weekend to 62.25 US cents.

Treasurer PETER COSTELLO has played down the fall as largely due to stronger-than-expected
growth in the US economy and expectations of higher rates there.

Opposition Leader KIM BEAZLEY says the blame for any rate rises rests with the GST
and fears about what impact it's about to have on inflation.

The Australian dollar has since recovered to around 63.70 US cents.

AAP RTV ss/rp/jn/rt

KEYWORD: ECONOMY (CANBERRA)

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