The Reserve Bank of Australia released today its minutes of the meeting of November 3 when the bank decided to raise borrowing costs for the second straight time by 25 basis points to settle at 3.50%, worth mentioning that Australia was the first in G 20 to raise borrowing costs after it was cut to 3.00% the lowest in 49 years.

The RBA said that the pace of increasing interest rates is an "open question" and if economic activity continued to improve according to forecasts, more gradual increase in interest rates will be appropriate overtime. The RBA slashed interest rates by 4.25% between September last year and April this year till its benchmark settled at 3.00% the lowest in half century then borrowing costs was raised by 25 basis points in October followed by a similar decision this month.

Investors expects more rate hikes next month especially with cheerful fundamentals continued to appear, worth mentioning that Mr. Stevens the RBA governor said that keeping interest rates at a very low level much longer is hurting the economy which found its way to recovery. On the other hand, retail sales and consumer confidence still weak that may force the RBA board members to delay further increases in interest rates.

However, The RBA said that economic activity in Australia and abroad may slow more than expected as the effect of the stimulus measures is waning. On the other hand, the reserve bank said that business and consumer confidence "could prove fragile".

Monetary policy makers expressed concerns about the rising local currency value as it threatens output and dampen inflationary pressures. The Australian dollar gained 33% against its American counterpart this year hurting the nation's exports and making it less competitive.

Regarding inflation rate, the RBA expects it to moderate on the short term, having in mind that the weighted median index of consumer prices gained 3.8% in the third quarter of this year to remain above the bank's target between 2% and 3%. Yet, the central bank expects inflation to be within the predetermined target in 2010.

The bank said in its minutes that credit conditions for some borrowers remain difficult. Business borrowing has been declining, the bank said, while large firms have better access to equity markets and to the debt markets, and the nation's equity market is recovering, noteworthy that the Australian S&P/ASX 200 index jumped 20% during this year.

Finally, reserve bank expected the economy to grow 1.75 this year compared with previous forecasts of 0.5% and economic growth is anticipated to accelerate to 2.25% by mid 2010 and to 3.25% by the end of 2010. As for growth in 2011, the bank expected gross domestic product to grow 3.25%.