World financial news

Australian bank lending rose by the most in 11 months, adding to signs of an economic rebound that may prompt central bank Governor Glenn Stevens to raise interest rates next week for a record fourth straight meeting.

Loans provided by banks and other finance companies advanced 0.3 percent in December from November, when they rose 0.1 percent, the Reserve Bank of Australia said in Sydney today. Lending increased 1.5 percent from a year earlier.

Today’s report may increase pressure on Stevens to boost the benchmark lending rate by a quarter percentage point to 4 percent as early as Feb. 2. The nation’s economy, which skirted the global recession in 2009, is forecast to accelerate this year, driven by a surge in consumer confidence and the biggest hiring boom in more than three years.

“It’s very heartening,” said Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney. “Consumers are quietly rejoicing in the improving economic environment and are a bit more willing to borrow and spend.”

Credit growth “will continue to track higher this year, and in the second half of the year business credit will start to strengthen,” he said.

The Australian dollar rose to 89.07 U.S. cents at noon in Sydney from 89 cents just before the report was released. The two-year government bond yield was unchanged at 4.22 percent.

Rate Bets

Traders are betting there is a 62 percent chance of a quarter-point increase in Australia’s overnight cash rate target to 4 percent at the central bank’s meeting next week, according to Bloomberg calculations based on interbank futures on the Sydney Futures Exchange at 11:58 a.m. Prior to today’s report, the chances of a move were 60 percent.

Lending in December rose three times more than the 0.1 percent median estimate of economists surveyed by Bloomberg News. Loans to consumers to buy houses climbed 0.7 percent from November and 8.2 percent from a year earlier.

Credit provided to consumers for purchases other than housing advanced 0.7 percent from a month earlier for an annual decline of 0.4 percent.

Demand for credit rose after employers added 135,700 jobs in the four months through December, the biggest four-month gain since 2006, pushing down the jobless rate to an eight-month low of 5.5 percent, a report showed on Jan. 14. Consumer confidence jumped in January by the most in six months, a survey by Westpac Banking Corp. showed last week.

The International Monetary Fund said this week that Australia’s gross domestic product will expand 2.5 percent this year and 3 percent in 2011. In October, it forecast 2 percent growth in 2010.

Lending to companies dropped 0.2 percent in December from the previous month, taking the annual decline to 7 percent, today’s report showed.

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