Australia: RBA keeps rates unchanged for third consecutive month
September 4, 2012
At its 4 September meeting, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.50%, in a decision that was expected by market analysts. The outcome marked the third consecutive meeting in which RBA keeps rates unchanged, following two consecutive cuts in May and June. The RBA sees signs of moderation at a global level, in particular in China, where growth remains robust but has slowed from "the exceptional pace seen in recent years". Monetary authorities noted that the slowdown in global activity is starting to affect prices for key natural resources and, in particular, for Australia's main export commodities. That said, at a domestic level, indicators available suggest that growth "has been running close to trend". Regarding price developments, inflation remains low, with underlying inflation close to 2.0% and overall consumer price inflation below that value. According to the RBA, the impact of the carbon pricing scheme - approved at the end of last year and effective since 1 July - is pushing inflation higher in the third quarter and the effect will persist over the next couple of quarters. 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, provided that domestic costs "remain contained". Monetary authorities reaffirmed the appropriateness of the current monetary policy stance and left the final statement unchanged from the previous two months, keeping a reference to the "subdued international outlook". According to analysts, the RBA is maintaining a wait-and-see approach and gauging the impact of global developments on the Australian economy - in particular of the slowdown in China and its consequences for the Australian resources sector - before cutting interest rates further.
Author: Armando Ciccarelli, Head of Data Solutions