Australia: RBA keeps rates unchanged
July 3, 2012
At its 3 July 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 decision follows on two consecutive rate cuts in May and June. According to the RBA, the global outlook is showing signs of moderation amid the exacerbation of the debt crisis in Europe and softer growth in China. Domestically, "recent data suggest that the economy continued to grow in the first part of 2012, at a pace somewhat stronger than had been earlier indicated". In addition, notwithstanding job shedding in some industries, the labour market continues to show positive signs. Regarding price developments, 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 judged that, 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. According to analysts, the phrasing of the closing statement suggests the RBA will maintain a wait-and-see approach in the coming months and gauge the impact of global headwinds on the Australian economy, before cutting interest rates further.