Australia: RBA maintains wait-and-see approach
August 7, 2012
At its 7 August meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.50%, in a decision that was largely expected by market analysts. The RBA continues to see signs of moderation in the global outlook, amid slower growth in China and the United States and contracting economic activity in Europe, as a result of the exacerbation of the debt crisis. At a domestic level, "most indicators suggest growth close to trend overall", while the labour market continues to show positive signs. Regarding price developments, the pace of growth in consumer prices continues to moderate, with inflation hitting a 13-year low in the second quarter. According to the RBA, the impact of the carbon pricing scheme - approved at the end of last year and effective since 1 July - will begin to push up inflation over the next couple of quarters. However, the Bank maintains the view that inflation will be in line with its 2.0% - 3.0% target range over both this year and next. Finally, monetary authorities reaffirmed that the monetary policy stance remains appropriate. The phrasing of the final statement was unchanged from last month and kept the reference to the subdued international outlook, confirming that the RBA is likely to maintain a wait-and-see approach in the coming months and gauge the impact of global developments on the Australian economy before cutting interest rates further.
Author: Armando Ciccarelli, Head of Data Solutions