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COUNTRYMAN. Karara Iron Ore Project at Perenjori. PHOTO: DANELLA BEVIS
The West Australian COUNTRYMAN. Karara Iron Ore Project at Perenjori. PHOTO: DANELLA BEVIS

The Reserve Bank is preparing for a fall in iron ore prices over coming months as it holds back on further interest rate cuts to prop up the rest of the economy.

"Iron ore prices had increased significantly over the past two months, largely reflecting stronger demand from China owing to increased industrial activity there as well as some rebuilding of iron ore stocks after earlier depleting inventories," the bank said.

"However, iron ore prices had run well ahead of Chinese steel prices in recent months and it was widely expected they would not be sustained at these high levels."