Cash rate on hold
(5 May 2011 – Australia) The Reserve Bank of Australia (RBA) has left interest rates on hold, indicating that the strength of the Australian dollar, if sustained, would start to drag on the economy.
The verdict leaves the RBA official cash rate still at 4.75 percent since November last year.
RBA governor Glenn Stevens indicated that the stronger Australian dollar is helping to keep a lid on prices, he said that as the exchange rate has risen further to its highest level in several decades.
"This, if sustained could be expected to exert additional restraint on the traded sector," he said.
The decision matched expectations of most banks and investors, however many believe a rate rise will not be too far off.
"The recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course," Mr Stevens said in the RBA statement.
''While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected,'' Mr Stevens said.
RBA governor Glenn Stevens indicated that the stronger Australian dollar is helping to keep a lid on prices, he said that as the exchange rate has risen further to its highest level in several decades.
"This, if sustained could be expected to exert additional restraint on the traded sector," he said.
The decision matched expectations of most banks and investors, however many believe a rate rise will not be too far off.
"The recent information suggests that the marked decline in underlying inflation from the peak in 2008 has now run its course," Mr Stevens said in the RBA statement.
''While the rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters, over the longer term inflation can be expected to increase somewhat if economic conditions evolve broadly as expected,'' Mr Stevens said.
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