Australia: RBA remains on hold at first 2013 meeting
February 5, 2013
At its 5 February meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.00%, in a decision largely anticipated by market analysts.
The decision comes amid a slightly more optimistic global scenario. According to the Bank, while economic activity is expected to be below trend, downside risks have subsided amid an improved outlook for China and more subdued financial tensions in the Euro area. At a domestic level, the outlook remains subdued. The RBA stated that the peak in resources' investment is approaching and other sectors of economic activity are not seen as picking up the slack from the mining sector. On a positive note, "there are indications of a prospective improvement in dwelling investment, with dwelling prices moving higher, rental yields increasing and building approvals higher than a year ago". According to the RBA, these appear an early sign that the monetary easing operated over the course of 2012 is passing through the real economy, thus providing a rationale for a pause in the easing cycle.
As inflationary pressures remain contained and inflation is expected to be in line with its 2.0% - 3.0% target range over both this year, the RBA stated that there is scope for a further easing of its monetary policy stance, "should that be necessary to support demand".
Author: Armando Ciccarelli, Head of Data Solutions