Reserve Bank leaves interest rate unchanged at 2 per cent

The Reserve Bank has left the official cash rate on hold at 2 per cent, in line with predictions.

In the statement accompanying the decision, Reserve Bank governor Glenn Stevens said the economy continues to grow “below longer-term averages” and so “monetary policy needs to be accommodative”.

Overall, however, very little changed in the statement.

“Further information on economic and financial conditions to be received over the period ahead will inform the board’s ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target,” the governor concluded.

That is almost identical to September’s statement, which read: “Further information on economic and financial conditions to be received over the period ahead will inform the board’s ongoing assessment of the outlook”.

Recent economic data shows the Australian economy is growing below trend, and inflation remains subdued, providing the backdrop for “easy” monetary policy.

On the flipside, the board members have been wary not to further stoke speculation in the Sydney and Melbourne property markets.

The lower Australian dollar has effectively provided a “grace” period for the central bank as it works to cushion the economy without the need for further interest rate cuts.

“The RBA governor will be very happy that the lower Australian dollar is talking some of the pressure off interest rates, and other sectors of the economy can afford to pick-up, rather than just housing,” TD Securities economist Annette Beacher said.

The Reserve Bank and other central banks, including the US Federal Reserve, have made reference to recent volatility on global markets, but at this point it remains a “wait and see” issue.

Economists say the Reserve Bank may not change its stance on monetary policy until well into 2016.

Source: ABC News