Australia Monetary Policy


RBA leaves rate unchanged for second consecutive meeting

On 6 March, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.25%, in a move widely expected by market analysts. The result marks the second consecutive meeting in which the RBA has kept rates on hold, following consecutive cuts in November and December. According to the RBA, the balance of risks is improving. Although economic conditions remain weak at a global level, a deep downturn is not in sight. Moreover, the action of European policymakers has helped to alleviate the troubles related to the debt crisis in peripheral Eurozone countries, although Europe will remain a potential source of shocks for some time yet. Meanwhile, information on the Australian economy continues to suggest growth close to trend overall, although with differences among sectors of economic activity. The Bank expects inflation to be in line with the 2.0% - 3.0% target range over both this year and the next. Monetary authorities judged that the setting of monetary policy remained appropriate for the moment, as inflation pressures remain contained and growth remains close to trend. However, the RBA reiterated that the inflation outlook would provide scope for easier monetary policy, if economic conditions were to deteriorate in the coming months. Analysts continue to believe that the phrasing hints at the possibility of further rate cuts going forward.

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