Rates unchanged now and later
Rates unchanged now and later

The Reserve Bank has kept official interest rates on hold for a 10th consecutive month and given no indication it will shift any time soon.

The official cash rate will stay at 2.5 per cent for another month after the bank said current settings were the “most prudent course” to take for the overall economy.

In a statement, bank governor Glenn Stevens said inflation was likely to remain within the Reserve’s 2-3 per cent target band for the next two years.

He said while there were good signs from mining exports this would only offset an expected fall in resource sector investment.

The jobs market was improving but it would be “some time yet” before unemployment fell consistently.

Mr Stevens said slow growth in wages and the containment of other costs meant there were few reasons to vary interest rate
settings.

“In the board’s judgment, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target,” he said.

“On present indications, the most prudent course is likely to be a period of stability in interest rates.”

There have been concerns that while prices for key exports have fallen over recent months there has not been a similar fall in the value of the Australian dollar.

Mr Stevens signalled the bank’s ongoing concern about the strong dollar.

“The earlier decline in the exchange rate is assisting in achieving balanced growth in the economy, but less so than previously as a result of the higher levels over the past few months,” he said.

“The exchange rate remains high by historical standards, particularly given the further decline in commodity prices.”

The bank’s decision follows weaker than expected retail trade figures but much stronger trade and current account details that show soaring exports of LNG, iron ore and coal.

The West Australian

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