Cash rate remains unchanged

Published on Tue, 07/08/2012, 02:44:51

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As predicted by most analysts, the Reserve Bank has left the cash rate at 3.5 per cent.

Glenn Stevens, RBA governor, said based on current assessments the global GDP will not grow anymore than the average pace for the rest of the year.

“Most commodity prices have declined, which has helped to reduce inflation and provided scope for some countries to ease macroeconomic policies. Australia's terms of trade peaked nearly a year ago, though they remain historically high,” he said in a statement.

According to the RBA in Australia most indicators suggest growth close to trend overall.

“Inflation remains low, with underlying measures near 2 per cent over the year to June, and headline CPI inflation lower than that. The effects of the price on carbon will start to affect these measures over the next couple of quarters,” Stevens said.

“The Bank's assessment of the outlook for inflation is unchanged: it is expected to be consistent with the target over the next one to two years. Maintaining low inflation over the longer term will, however, require growth in domestic costs to continue their recent moderation as the effects of the earlier exchange rate appreciation wane.”

The RBA noted however the exchange rate remains high despite the observed decline in the terms of trade and the weaker global outlook.

“With inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate,” Stevens concluded.
 


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