RBA keeps rates on hold at 3.5%

The Reserve Bank has kept the official interest rate on hold this afternoon, a move largely in line with economists’ expectations.

Although the RBA reduced rates in both May and June, it has since kept the rate on hold due to lower-than-expected inflation figures, and more positive economic data.

In a statement, governor Glenn Stevens said that with inflation expected to be consistent, and growth close to trend, its current stance on monetary policy seemed appropriate.

“In Australia, most indicators suggest growth close to trend overall. Labour market data show moderate employment growth, even with job shedding in some industries, and the rate of unemployment has thus far remained low.”

However, Stevens even touched on the carbon price in the statement, suggesting increased prices may feed into official inflation figures during the next couple of quarters.

This also suggests the RBA won’t be looking to cut or raise rates for some time, with Steven saying the outlook for inflation is “expected to be consistent with the target over the next one to two years”.

“Maintaining low inflation over the longer term will, however, require growth in domestic costs to continue their recent moderation as the effects of the earlier exchange rate appreciation wane.”

Stevens said the weakest part of the economy appears to be in Europe, where economic activity has been contracting and countries are still piecing together balance sheets.

But overall, the situation mostly remains unchanged. Stevens noted interest rates are lower than during most of 2011, and that borrowers are experiencing rates below their medium-term averages.

“While it is too soon to see the full impact of those changes, dwelling prices have firmed a little over the past couple of months, and business credit has over the past six months recorded its strongest growth for several years. “


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