Rates stay on hold

Steven Cross

The Reserve Bank of Australia has left the official cash rate on hold for the third consecutive month.

The official cash rate remains at 4.25 per cent, which is in-line with forecasts from leading economists that rates will stay on hold until mid-year.

In the minutes of the Monetary Board Meeting, the Board said that, “[The RBA’s] judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate."

“The Board's view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy.”

“The world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring.

"In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year.”

The RBA also acknowledged the heavy reliance on the mining sector, and the under-performing of industries such as construction.

“There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time.”

Cameron Kusher, researcher at RP Data, said that he isn’t surprised with the RBA's decision.

“I think [the RBA] will be pretty happy with these sets of figures. House values fell last year, they are still four and a half odd per cent down over the year. But the first two cuts improved stability.”

Steven Cross

The Reserve Bank of Australia has left the official cash rate on hold for the third consecutive month.

The official cash rate remains at 4.25 per cent, which is in-line with forecasts from leading economists that rates will stay on hold until mid-year.

In the minutes of the Monetary Board Meeting, the Board said that, “[The RBA’s] judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate."

“The Board's view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy.”

“The world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring.

"In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year.”

The RBA also acknowledged the heavy reliance on the mining sector, and the under-performing of industries such as construction.

“There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time.”

Cameron Kusher, researcher at RP Data, said that he isn’t surprised with the RBA's decision.

“I think [the RBA] will be pretty happy with these sets of figures. House values fell last year, they are still four and a half odd per cent down over the year. But the first two cuts improved stability.”

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