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RBA holds interest rates

RBA holds interest rates

(7 June 2016 – Australia) The Reserve Bank of Australia (RBA) said that it will not change the official cash rate (OCR), which remains at 1.75 percent, following its 7 June Board meeting.

The Australian dollar was at US$0.737 immediately after the announcement, having traded between $US0.736 and $US0.737 through Tuesday morning.

The RBA cut the OCR to a record low 1.75 percent after inflation data was "unexpectedly low" in April.

Before the announcement, the Australian Securities Exchange (ASX) RBA Rate Indicator was showing an 8 percent expectation of a cut to 1.5 percent and a 92 percent chance of the cash rate remaining steady at 1.75 percent.

In a statement, the RBA Governor Glenn Stevens said recent economic data suggested that overall growth was continuing despite a "very large decline in business investment".

"Low interest rates have been supporting domestic demand and the lower exchange rate overall is helping the traded sector," he said.

Credit to businesses had picked up, while that to households had moderated a little, but the general environment was assisting in making the necessary economic adjustments, Stevens outlined.

"An appreciating exchange rate could complicate this," he added.

In a memo, Commonwealth Bank’s currency strategist, Joe Capurso said Stevens’ comments were "mildly bullish" for the Australian dollar because "it clearly indicates the RBA is in no hurry to cut interest rates again soon."

"The next possible chance [the Board] would entertain a cut is at the August meeting, after the Q2 CPI inflation reading in late July," Capurso said.

The next RBA Board meeting will take place on July 5.

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