Reserve Bank leaves rates on hold
The Reserve Bank decided to leave the official cash rate unchanged for the fourth consecutive month today at it’s monthly board meeting. Continued concerns about the global economic recovery and the lack of an excessively high inflation rate meant the RBA’s decision to keep the official cash rate unchanged a 4.5% was widely expected.
In his announcement of the decision made by the board, the RBA’s Governor, Glenn Stevens, said the global economy had been growing “faster than trend” but was expected to wind back to “about trend pace” over the coming year. The RBA also said a cautious mood was persisting in financial markets, with share prices falling and major countries’ government bond yields “reaching unusually low levels”.
The RBA’s assessment of growth in Australia remains for solid, but not rapid, growth against the softer and still-uncertain international environment. “The high level of terms of trade is boosting incomes, which will tend to add to demand over the year ahead, while the effects of earlier expansionary policy measures will be diminishing,” the RBA Governor Glenn Stevens said in the statement. He said business investment was expected to “increase strongly”, but that “upward pressure on dwelling prices appears to have abated”. Overall it was a fairly balanced outlook, with no real sign of increasing concern over inflation.
There was no real suggestion that the interest rate rise that seems inevitable unless there is a further slump in the global economy was imminent. “With growth in the near term likely to be close to trend, inflation close to target and with the global outlook remaining somewhat uncertain, the board judged this setting of monetary policy to be appropriate for the time being,” the RBA statement concluded.
The wording of the statement suggests that “time being” could last quite a few months more.