Australia Monetary Policy


RBA leaves rates unchanged

At its 4 June meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 2.75%, in a decision in line with market expectations. The move follows a 25 basis points rate cut in the previous month and brings the policy rate to a historic low.

The RBA maintains that economic activity at a global level will be below average this year, but pick up over the next. At a domestic level, growth was below trend over the past year and it is expected to remain sluggish in the near term. Regarding price developments, inflation is in line with the Bank's target and is expected to stay consistent with it over the next one or two years.

The RBA believes that the earlier monetary easing is beginning to show effects and will have further impact in the coming months. On the back of lower interest rates, the Australian dollar (AUD) has moderated during the last month but "it remains high considering the decline in export prices that has taken place over the past year and a half".

According to the Bank, easier financial conditions will help support over the coming months. In addition, the subdued inflation outlook provides room for further easing in the coming months to stimulate demand. FocusEconomics Consensus Forecast panellists expect the cash rate to end 2013 at 2.92% and to rise to 3.38% by the end of 2014.

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Australia Monetary Policy Chart

Australia Monetary Policy June 2013

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).

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