- POSTED: 05 Aug 2014 15:52
Australia's central bank Tuesday (Aug 5) held interest rates at a record low of 2.5 per cent, marking a year since it last loosened monetary policy as it sought to boost non-mining growth.
SYDNEY: Australia's central bank Tuesday (Aug 5) held interest rates at a record low of 2.5 per cent, marking a year since it last loosened monetary policy as it sought to boost non-mining growth.
The Reserve Bank of Australia flagged "a period of stability" in the cash rate as it cautioned that economic growth would likely be "a little below trend" in the year ahead. In a statement, it also said investment spending in the resources sector was starting to decline significantly and noted the strength in the local currency.
"In the board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target," governor Glenn Stevens said. "On present indications, the most prudent course is likely to be a period of stability in interest rates."
The Australian dollar looked through the statement, remaining stable at about 93.27 US cents.
The central bank's unchanged position was widely expected, with a majority of economists tipping the RBA to keep the cash rate at 2.5 per cent for several more months. "It was broadly expected that the bank would stick to the message it's been giving now for at least three or four months," Citi's chief economist for Australia Paul Brennan said. "In particular, the last two paragraphs of the statement were totally unchanged, so that suggests that the bank is very happy with leaving rates where they are and there is a quite a high bar to changing monetary policy."
The central bank has slashed the cash rate eight times, down from 4.5 per cent, since November 2011, ahead of an expected sharp fall in mining investment following an unprecedented boom in the sector. The lower interest rates were meant to encourage growth in non-resources industries, and have helped to support a boom in the housing market, boosting property prices.