Aussies tipped to lift rates again

SYDNEY - Australia's Glenn Stevens will continue leading the world in raising interest rates, with economists predicting a record fourth straight increase at the Central Bank's next meeting in February.

Reserve Bank Governor Stevens will boost the overnight cash rate target by another quarter point to 4 per cent on February 2, adding to Tuesday's third monthly increase, according to all 16 economists surveyed by Bloomberg News.

Cash handouts by Kevin Rudd's Government have boosted consumer confidence and house prices, and China's demand for resources has stoked a new mining-jobs boom.

"Reserve Bank officials are taking the path of least hazard," said Stephen Walters, chief economist at JPMorgan Chase in Sydney, who tips another increase in February followed by "steady" gains in 2010.

"They are hiking while they have time on their side and the exit from emergency settings can be orderly."

Traders aren't as convinced. The nation's currency fell on Tuesday after Stevens said the board's "material adjustments" to the benchmark rate, now at 3.75 per cent, will be enough to keep inflation within his 2 per cent to 3 per cent target range.

Investors are betting there is only a 36 per cent chance of an increase in February, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange late on Tuesday.

"I can see how people will interpret this is a pausing message - and that's more than fair," said Adam Carr, a senior economist at ICAP Australia in Sydney.

"Nevertheless, I think there are several reasons why the Reserve Bank won't be pausing for too long."

- BLOOMBERG