Subdued international outlook stagnates RBA cash rate
(8 August 2012 – Australia) The Reserve Bank of Australia (RBA) has announced that it has left the cash rate unchanged at 3.5 percent for August, and that it sees no obvious trigger to cut.
The monetary policy decision by RBA governor, Glenn Stevens stated that although for the early months of 2012, growth in the world economy had since softened.
'Most commodity prices have declined which has helped to reduce inflation and provided scope for some countries to ease macroeconomic policies. Australia's terms of trade peaked nearly a year ago, though they remain historically high,' the statement said.
China was seen to be at a more sustainable pace and no longer slowing, while the rest of Asia was recovering.
The United States was growing at a modest pace, and the significant area of weakness continues to be Europe.
'Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, decline to exceptionally low levels.'
'Nonetheless, capital markets remain open to corporations and well-rated banks and Australian banks have had no difficulty accessing funding, including on an unsecured basis.'
The statement showed inflation remains low, with underlying measures near 2 percent over the year to June, and headline CPI inflation lower than that.
The effects of the price on carbon will start to affect these measures over the next couple of quarters. The Bank's assessment of the outlook for inflation is unchanged: it is expected to be consistent with the target over the next one to two years.
Maintaining low inflation over the longer term will, however, require growth in domestic costs to continue their recent moderation as the effects of the earlier exchange rate appreciation wane.
'At today's meeting, the Board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate.'
'Most commodity prices have declined which has helped to reduce inflation and provided scope for some countries to ease macroeconomic policies. Australia's terms of trade peaked nearly a year ago, though they remain historically high,' the statement said.
China was seen to be at a more sustainable pace and no longer slowing, while the rest of Asia was recovering.
The United States was growing at a modest pace, and the significant area of weakness continues to be Europe.
'Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, decline to exceptionally low levels.'
'Nonetheless, capital markets remain open to corporations and well-rated banks and Australian banks have had no difficulty accessing funding, including on an unsecured basis.'
The statement showed inflation remains low, with underlying measures near 2 percent over the year to June, and headline CPI inflation lower than that.
The effects of the price on carbon will start to affect these measures over the next couple of quarters. The Bank's assessment of the outlook for inflation is unchanged: it is expected to be consistent with the target over the next one to two years.
Maintaining low inflation over the longer term will, however, require growth in domestic costs to continue their recent moderation as the effects of the earlier exchange rate appreciation wane.
'At today's meeting, the Board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate.'
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