Australia Looking to Raise Interest Rates Again in Future

I feel really bad for Australia... and Europe. And South America. And Asia. Somehow all these regions have inflation. It is very strange because in America we are "inflation free!". I guess they have not learned to manipulate their economic reports to the degree we have mastered. It really is a simple solution - keep chanting inflation is benign and contained and *POOF* inflation is benign and contained. Until then you have problems like this...

• The Australian central bank bluntly warned Monday that it probably would need to raise interest rates again to restrain inflation, even as it trimmed its outlook for economic growth.
• The unusually explicit warning from the Reserve Bank of Australia lifted the Australian dollar above 90 U.S. cents as the market priced in a greater risk of a further rate increase, perhaps as soon as March. The bank "is on the warpath," said Rory Robertson, an interest rate strategist at Macquarie. "It certainly highlights the fact they're thinking seriously about going again in March."
• Just last week the central bank bucked the global trend by lifting its benchmark cash rate by 25 basis points to an 11-year peak of 7 percent, a level it said was on the "restrictive side of neutral."
• It cautioned then that the economy would have to cool significantly to restrain core inflation, which hit a 16-year high of 3.6 percent in the fourth quarter of 2007.
• The bank "clearly has no more tolerance for upside surprises on inflation and are concerned about it feeding through to wage and price expectations," Ong added. "The new inflation forecasts show they don't even get near their target until 2010, which leaves no room for policy errors."
• The central bank lifted its forecast for underlying inflation for the year to June 2008 to an annual rate of 3.75 percent, up sharply from 3.25 percent in its November statement and well above its target band of 2 percent to 3 percent.
• "Most importantly, if it is not reversed reasonably quickly the recent pick-up in inflation carries the risk of generating an upward drift in inflation expectations, which could feed back into wage and price-setting behavior," the bank warned.

I can only imagine what central bankers worldwide (many who have been raising rates - both in Asia and South America) to combat inflation must be thinking about our jolly band of rate cutters here in the US of A. :)

I've been debating the Australian Dollar (FXA) as a hedge (again) but have just decided to stick with my crops and gold. I just wake up every morning thankful I live in the 1 country in the world where inflation is negligible. We truly are blessed here. ;)