Australia's central bank holds rates at 2.50%
Sydney (AFP) - Australia's central bank held interest rates at their record 2.50 percent low Tuesday, adopting a wait-and-see approach as the dollar adjusts and earlier cuts boost confidence.
The Reserve Bank of Australia kept rates on pause for a second consecutive month, as expected, after a series of cuts designed to stimulate the economy as its decade-long Asia mining splurge cools.
Governor Glenn Stevens said the bank's board judged "the setting of monetary policy remained appropriate" at its monthly meeting for October, with the full effects of earlier moves "still coming through, and will be for a while yet".
Globally, growth was running "a bit below average this year, with reasonable prospects of a pick-up" in 2014, said Stevens. Commodity prices are below their peaks but remain high by historical standards.
"The (Australian) economy has been growing a bit below trend over the past year. This is expected to continue in the near term as the economy adjusts to lower levels of mining investment," Stevens said.
"There has been an improvement in indicators of household and business sentiment recently, though it is too soon to judge how persistent this will be."
Stevens said the Australian dollar was about 10 percent lower than it had been in April but "a lower level of the currency than seen at present would assist in rebalancing growth in the economy".
Unemployment has edged up to 5.8 percent, its highest level in four years and the worst labour market reading since the financial crisis, while inflation was a muted 0.4 percent in the second quarter.
Borrowing remained "relatively subdued" but Stevens said there was "continuing evidence" that lower yields on savings were driving consumers back towards spending.
The dollar bounced to 93.74 US cents from 93.30 cents prior to the rates announcement, which was seen as favouring a hiking rather than cutting bias.
"With the Australian economy showing signs of life (in) house prices, home sales, PMI (manufacturing), confidence and maybe retail, I think we have seen the low for rates," said AMP Capital economist Shane Oliver.
But other analysts warned the case was less clear-cut, with further easing expected and rates likely to remain very low through 2014.
"Recent data have been solid enough for the RBA to delay further loosening... However, we do not think the RBA will take a back seat for long," said Capital Economics analyst Daniel Martin, predicting at least one more 25-basis-point cut this year.
"After all, the boom in mining investment is still set to cool over the coming quarters, which means that the economy will lose its main driver of growth. More loosening is likely to be needed as the mining sector slows."
