Rates steady, but could soon rise
(11 August 2009 – Australia) While Australia’s official cash rate was held steady at the latest RBA meeting, signs are pointing towards the potential for future increases in interest rates.
The RBA has left the official cash rate untouched at 3.0 percent for the fourth consecutive month, after six rate cuts starting in September last year.
With the RBA giving no commentary on the potential for further rate cuts, this announcement indicates the end of the easing cycle.
RBA governor, Glenn Stevens said that the current monetary policy is appropriate given the economy's circumstances, though the situation will obviously be monitored for any changes.
Consumer spending, exports and confidence levels have increased recently, suggesting that the risk of a severe contraction in the Australian economy has abated, Stevens said.
Stevens said that the most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak. Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.
With the economy moving in the right direction, there is now the chance of official rate rises.
Stevens said that with the cash rate at an unusually low level and the global economy stabilising, movement towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge.
While a recent IMF report suggested further rate cuts in Australia, the big change since then has been the recent optimistic economic data on spending and confidence in particular.
With the RBA giving no commentary on the potential for further rate cuts, this announcement indicates the end of the easing cycle.
RBA governor, Glenn Stevens said that the current monetary policy is appropriate given the economy's circumstances, though the situation will obviously be monitored for any changes.
Consumer spending, exports and confidence levels have increased recently, suggesting that the risk of a severe contraction in the Australian economy has abated, Stevens said.
Stevens said that the most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak. Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.
With the economy moving in the right direction, there is now the chance of official rate rises.
Stevens said that with the cash rate at an unusually low level and the global economy stabilising, movement towards a more normal setting of monetary policy could be expected at some point if further signs of a durable recovery emerge.
While a recent IMF report suggested further rate cuts in Australia, the big change since then has been the recent optimistic economic data on spending and confidence in particular.
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