Current cash rate good enough
(3 March 2009 – Australia) After five consecutive falls, the Reserve Bank of Australia (RBA) has decided to leave the target cash rate at its current level of 3.25 percent.
With 400 basis points being slashed from interest rates in five consecutive meetings since September 2008, the RBA decided that the current cash rate is enough to keep the economy moving.
Economists had predicted a rate cut of around 0.25 percent, however the RBA has kept flexibility in reserve should the economy need further stimulation.
Despite outlining the dire circumstances of the economy across the world, RBA governor, Glenn Stevens, said that the situation in Australia was relatively better.
Stevens said that in Australia demand has not weakened as much as in other countries and the Australian economy has not experienced the sort of large contraction seen elsewhere.
While the Australian financial system remains strong, economic conditions are clearly weak and such conditions are likely to continue in the near term, causing a decline in inflation over time, he added.
Stevens reasoned that market and mortgage rates are at very low levels by historical standards and business loan rates are below recent averages.
Given this and the fiscal initiatives current on the table, the RBA decided that there was enough support to domestic demand over the period ahead and thus kept interest rates at their current level.
Economists had predicted a rate cut of around 0.25 percent, however the RBA has kept flexibility in reserve should the economy need further stimulation.
Despite outlining the dire circumstances of the economy across the world, RBA governor, Glenn Stevens, said that the situation in Australia was relatively better.
Stevens said that in Australia demand has not weakened as much as in other countries and the Australian economy has not experienced the sort of large contraction seen elsewhere.
While the Australian financial system remains strong, economic conditions are clearly weak and such conditions are likely to continue in the near term, causing a decline in inflation over time, he added.
Stevens reasoned that market and mortgage rates are at very low levels by historical standards and business loan rates are below recent averages.
Given this and the fiscal initiatives current on the table, the RBA decided that there was enough support to domestic demand over the period ahead and thus kept interest rates at their current level.
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