RBA leaves rates on hold

The Reserve Bank of Australia has left offical interest rates on hold at 7.25%.

RBA governor Glenn Stevens said that while inflation was rising, there is evidence that growth in aggregate demand in slowing.

“Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation. On balance, the board’s current assessment is that demand growth will remain moderate this year. In the short term, inflation is likely to remain relatively high, but it should decline over time provided demand evolves as expected. Should demand not slow as expected or should expectations of high ongoing inflation begin to affect wage and price setting, that outlook would need to be reviewed.”

Stevens specifically noted the impact of the global credit crisis on Australia. “As a result of the board’s earlier decisions, additional rises in market interest rates and tougher credit standards for some borrowers, there has been a substantial tightening in financial conditions since the middle of last year. Conditions in international financial markets, though improved in recent weeks, also remain difficult. These factors are acting to restrain demand.” 


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