The Reserve Bank of Australia has announced the decision of its monthly board meeting.
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Most economists expect the RBA will keep its powder dry again next month, but the outlook becomes more divided for later in the year, with some expecting rising headwinds may spur the central bank into action.
The Reserve Bank of Australia reiterated that low inflation may provide the scope for easier policy.
The Australian dollar fell against all its major counterparts after a larger-than-expected drop in building approvals and as traders bet the central bank will cut interest rates later this year.
“The board therefore decided that the current setting of monetary policy remained appropriate”, Stevens said.
“Given these conditions, it is appropriate for monetary policy to be accommodative”, he said.
Forty-five per cent of experts surveyed by finder.com.au believe Australia is at the bottom of the interest rate cycle, while 26 per cent are forecasting one further rate cut to 1.75 per cent. Supervisory measures are working to emphasise prudent lending standards to limit the threats posed by a housing bubble, while the pace of growth in house prices throughout Sydney and Melbourne has moderated.
RBA governor Glenn Stevens said in a statement this afternoon leaving the cash rate on hold was the best course of action as inflation is “quite low” at the moment. They will continue to judge whether improvements in job markets are holding and whether the recent financial turbulence is a sign of weaker global and domestic demand.
Many commentators anticipated the Reserve Bank would maintain its observational stance, waiting for a significant change in local or global economic conditions before opting to move rates and maintaining future leverage in the process.
The ABS national unemployment rate seasonally adjusted lifted sharply over January to 6 per cent, reversing the encouraging falling trend of recent months.
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The ANU Centre for Applied Macroeconomic Analysis Shadow Board attributed a 68 per cent confidence for the cash rate staying at 2 per cent.
