RBA leaves rates on hold
(8 June 2011 – Australia) The Reserve Bank of Australia (RBA) kept interest rates on hold on Tuesday and was unclear about what the future would hold.
The statement by the RBA Governor, Glenn Stevens said the bank expected that as the temporary price shocks dissipate over the coming quarters, CPI inflation will be close to target over the next 12 months.
The comments today dropped a key reference in the May statement that the 'marked decline' in underlying inflation had run its course and would start to lift.
Financial markets had expected an interest rate rise in August, following the next set of inflation numbers scheduled for publishing in late July.
However, the statement today prompted an immediate reaction, and the futures market predicted the bank could hold off until the end of the year.
There had been a 14 percent chance of a July increase and a 60 percent likelihood of an August hike. However, the futures market has sold off aggressively today and abolished the prospect of a move in the next two months.
The comments today dropped a key reference in the May statement that the 'marked decline' in underlying inflation had run its course and would start to lift.
Financial markets had expected an interest rate rise in August, following the next set of inflation numbers scheduled for publishing in late July.
However, the statement today prompted an immediate reaction, and the futures market predicted the bank could hold off until the end of the year.
There had been a 14 percent chance of a July increase and a 60 percent likelihood of an August hike. However, the futures market has sold off aggressively today and abolished the prospect of a move in the next two months.
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