Official interest rates still on hold

Speculation on what the Reserve Bank of Australia (RBA) would do with the cash rate at its monthly meeting ended today with the central bank’s board announcing it would remain unchanged at 4.75 per cent.

RBA Governor Glenn Stevens cited one of the reasons for leaving the cash rate as is as the acute sense of uncertainty in global financial markets over recent weeks, particularly in Europe and the United States.

He said, however, the RBA would “continue to assess carefully the evolving outlook for growth and inflation” to determine whether further policy tightening is needed.
Stevens said year-ended consumer price index (CPI) inflation has been high, affected by the extreme weather events earlier in the year, but as these effects reverse over the next couple of quarters, CPI inflation should decline.

“But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years,” he said.

“While they have, to date, remained consistent with the two to three per cent target on a year-ended basis, the board remains concerned about the medium-term outlook for inflation.”

The cash rate has now remained unchanged since November last year, which is reportedly the longest it has remained steady in four years.

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