Yahoo Finance RBA keeps interest rates on hold
The Reserve Bank has decided to keep interest rates on hold at a record low of 2.0 per cent.
The RBA’s decision to leave the cash rate unchanged for the third month in a row was in line with economists’ expectations. It is widely believed the bank will refrain from cutting rates again this year.
All 16 economists surveyed by AAP expected the cash rate to remain unchanged on Tuesday, and only four expect any movement before the end of the year.
The Reserve Bank cut rates by 25 basis points to 2.0 per cent in May, citing weak business investment and slowing Chinese growth.
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Governor Glenn Stevens said it appeared the Australian economy continued to grow but below its long term averages.
“Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. Recent information confirms that domestic inflationary pressures have been contained,” he said.
“That should remain the case for some time, given the very slow growth in labour costs. Inflation is thus forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.”
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Mr Stevens said house prices in Sydney continued to grow but elsewhere there were some apparent differences.
One of the bank’s biggest concerns, the Australian dollar, got one mention by Mr Stevens who said the currency was “adjusting” to falls in commodity prices.
The Australian dollar edged up slightly on the release of the statement.
The decision followed new figures from the bureau of statistics showing a sharp lift in retail spending through June.
The total value of retail sales lifted by a stronger-than-expected 0.7 per cent in the final month of the financial year. Sales of household goods drove the result while there was a small drop in food sales.
All States and Territories recorded an increase through the month.
While the domestic side of the economy is improving, separate trade figures showed a widening in the nation’s trade deficit.
The country ran a $2.9 billion trade deficit, a 10 per increase over the May result.
