THE Reserve Bank has left the official cash rate on hold for the third consecutive month.
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The bank had lowered the rates by 25 basis points each in February and May.
In a statement accompanying the decision, RBA governor Glenn Stevens appeared more upbeat about the Australian economy. Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and creditworthy private borrowers remain remarkably low.
The RBA was also more upbeat on the Australian economy, implicitly highlighting an uptick in business confidence. Recent information confirms that domestic inflationary pressures have been contained.
“That should remain the case for some time, given the very slow growth in labour costs”.
“Monetary policy needs to be accommodative”, Stevens said.
Low interest rates are supporting borrowing and spending, Stevens said today, with moderate overall credit growth and growth in lending to the housing market broadly steady in recent months.
Mr Stevens said house prices in Sydney continued to grow but elsewhere there were some apparent differences.
But they are anticipating a limp result for the June quarter overall, which doesn’t bode well for economic growth when the national accounts are released in a month’s time.
“The Bank is working with other regulators to assess and contain risks that may arise from the housing market”. The Board today judged that leaving the cash rate unchanged was appropriate at this meeting.
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The currency jumped half a US cent to US$0.7348 after the Reserve Bank of Australia (RBA) dropped a reference to a further decline being necessary, saying only that the Aussie was adjusting to weak commodity prices. The central bank has cut rates twice already this year in response to sharp falls in commodity prices, economic weakness, and benign inflation.
