RBA announces rate hold

Reserve Bank Australia

The RBA has announced it will hold the official interest rate at three percent.

After the economy has shown signs of stability the Reserve Bank has elected to hold the official cash rate at three percent. With international economies stabilising in recent months and Australian indicators suggesting that growth was close to trend, the Board decided to leave the cash rate unchanged.

Moderate growth in private spending and rising investment in dwelling accommodation has also contributed to today’s decision. In a statement, Governor of monetary policy decision Glen Stevens said, “The Board’s view is that with inflation likely to be consistent with the target, and with growth likely to be a little below trend over the coming year, an accommodative stance of monetary policy is appropriate.”

Most sectors expected today’s hold decision due to the steadiness of house prices and financial markets.

“The RBA is likely to be reasonably satisfied with how the housing market has played out since they embarked on the rate cutting cycle back in November 2011. Since that time dwelling values across the combined capital cities of Australia have increased by 0.8 percent, and values are up 3.1 percent since bottoming out at the end of May last year. Most other indicators are also showing some subtle improvements, albeit from a low base,” said RP Data national research director Tim Lawless.

“Consumer confidence has shown some improvement, commodity prices are once again on the rise, and share markets have shown some consistent gains as well. The big wild card remains the labour market; how high will unemployment go and at what level will the RBA react with a further cut to the cash rate.”