Mr Stevens referred to events in Greece and China only in passing, and noted that the U.S. Federal Reserve is likely to start raising its cash rate “later this year”.
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The RBA last cut interest rates in May, when it reduced the overnight cash rate target by 25 basis points to a fresh record low of 2 per cent.
The currency has fallen against all except one its 16 major counterparts this month after the Reserve Bank of Australia left its benchmark at 2 percent Tuesday as economists forecaste.
In a statement mostly identical to the previous month, Reserve Bank governor Glenn Stevens said it was appropriate to leave interest rates unchanged. Low interest rates are acting to support borrowing and spending.
The local currency touched a six year low on Monday, due to the impact of the ongoing Greek debt crisis. Australia’s terms of trade are falling nonetheless. “Credit is recording moderate growth overall, with stronger borrowing by businesses and growth in lending to the housing market broadly steady over recent months”, Stevens said.
Market indexes in Sydney jumped after the RBA left its key rate unchanged and offered a slightly positive outlook on the economy.
The unemployment rate has edged higher and hovered around a decade-high of 6.0 per cent, wages growth has been slow and inflation contained within the central bank’s 2.0-3.0 per cent target band. Unemployment has been little changed recently, and the economy is likely to be operating with a degree of spare capacity for some time yet.
Australian dollar closed at 74.94 USA cents and in stock trading turnover gained to 751 million shares worth $5.2 billion. Indeed, Sydney’s property market remains somewhat inflated which the Bank confirmed it was still working with other regulators to assess. “In other asset markets, prices for equities and commercial property have been supported by lower long-term interest rates”, he said.
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Nomura rate strategist Andrew Ticehurst said bond futures prices fell in response to the belief the RBA will keep the cash rate unchanged for the foreseeable future.
