<div><p> Australia's inflation rate increased in the fourth quarter of 2009, figures showed Wednesday, exceeding forecasts and boosting the prospects of an interest rate rise next week.</p><p>The Consumer Price Index (CPI) rose 0.5 percent in the three months to December from the previous quarter and the annual headline inflation rate was 2.1 percent -- above the expected figures of 0.4 percent and 2.0 percent.</p><p>The central bank's preferred core measure of inflation -- which strips out some of the more volatile prices -- slowed to an average of 0.65 percent for the quarter, the Australian Bureau of Statistics said.</p><p>But it rose an average 3.4 percent from a year earlier, placing it outside the bank's inflation target range of 2.0 to 3.0 percent and strengthening arguments for an interest rate rise.</p><p>Treasurer Wayne Swan said the figures showed that inflation had moderated significantly since 2008 due to the effects of the global downturn and that the economy was still not at full capacity.</p><p>"Inflation is expected to remain moderate over the near-term as the fallout from the global recession continues to impact the domestic economy," he told reporters in Canberra.</p><p>While refusing to speculate on whether the Reserve Bank of Australia (RBA) would raise rates, Swan said its Governor Glenn Stevens had "made it very clear that as the economy recovers, there will be adjustments to the rate."</p><p>Economists said the figures gave the central bank little reason to keep interest rates on hold at its February 2 meeting, and it is widely expected to raise its official cash rate from 3.75 percent.</p><p>"A rate hike was already in the bag prior to this number. The only thing that would have changed it would have been if the inflation numbers were a lot better than expected," AMP Capital Investors chief economist Shane Oliver said.</p><p>Oliver said the quarterly inflation rate, combined with strong domestic data for employment, retail sales, house prices and consumer confidence, would see the official cash rate rise another 0.25 percent.</p><p>"It's not bad enough to justify the reserve bank getting aggressive, (but) it's not good enough to allow the Reserve Bank to hold fire," he told AFP.</p><p>The inflation figures came as a key indicator showed that the Australian economy, which managed to avoid recession in the global downturn, was recovering more strongly than expected.</p><p>The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months ahead, recorded an annualised growth rate of 7.6 percent in November.</p><p>"Over the last six months, growth has accelerated from minus 3.2 percent in June to the current 7.6 percent," Westpac chief economist Bill Evans said.</p><p>"In through-the-year terms, we expect the growth rate of domestic demand to bounce back from around 1.25 percent in 2009 to 4.25 percent in 2010."</p><p>Evans said he also expected another interest rate rise in February, following rises in October, November and December.</p><p>"We expect to see another rate hike of 0.25 percent to be announced by the Bank on February 2 with the likelihood of another two increases of 0.25 percent each by June," he said.</p><img src="http://admatch-syndication.mochila.com/images/ad.gif?aid=67876919&bid=informcom" /></div><div id="copyright"><div>

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