RBA flags stable cash rate outlook
By
Adam Smith
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6/07/2011 2:30:00 AM
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1
comments
The RBA has again left the cash rate untouched, and rates may stay on hold longer than previously expected.
At its July board meeting yesterday, the Reserve Bank indicated that slowing employment growth, modest credit demand and softening asset prices as reasons for a continued cash rate freeze. The Bank also noted that temporary price shocks from natural disasters earlier in the year are expected to dissipate, leaving inflation close to the Bank's target range over the next 12 months.
Stevens conceded that recovery following this year's floods and cyclones was proceeding slower than expected, and that growth for 2011 was now not expected to be as strong as earlier predicted.
However, the Bank has questioned whether moderate growth of global economies and inflationary pressures will continue. In a statement following the decision, RBA governor Glenn Stevens stated that a number of other countries have tightened monetary policy. Stevens pointed to Australia's high terms of trade and growth in national incomes.
"Investment in the resources sector is picking up strongly in response to high levels of commodity prices and the outlook remains very positive. A number of service sectors are also expanding at a solid pace," he said.
Loan Market spokesperson Paul Smith said there was a strong case for the Reserve Bank to leave rates untouched for the remainder of the year. He pointed to recent ABS figures showing a 7.9% decline in dwelling approvals for May, and said consumer confidence was still shaky.
"Many analysts have forecasted inflationary pressures to ease off without any short-term rate rises. Right now people are very cautious about spending, but the RBA can go a long way to restore confidence by keeping rates down," he commented.
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sidbroker on
08 Jul 2011 02:00 PM
Already the rates are way to high. We all need a helping hand Mr. Stevens. We are not responsible for the booming mining industry and yet we all have to pay. It is absolutely NOT FAIR. You should bow your head in shame sir.