The Reserve Bank of Australia has kept rates on hold. Picture: Reuters.
The Reserve Bank of Australia has kept rates on hold. Picture: Reuters.

The Reserve Bank board has left official interest rates on hold for its 10th consecutive meeting.

The official cash rate will remain at 2.5 per cent for another month, where it has sat since August last year.

It follows a drop in consumer confidence in the wake of the Federal Budget and signs of sluggishness across the retail sector.

Governor Glenn Steven signalled there would be no change to rate settings for an extended period.

“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.”

Mr Stevens said the bank expects the economy to slow from the strong March quarter result.

He said those figures had been pushed up by a strong increase in resource exports, but smaller increases were likely in coming quarters.

“Moderate growth has been occurring in consumer demand,” he said.

“A strong expansion in housing construction is now under way. At the same time, resources sector investment spending is starting to decline significantly.

“Signs of improvement in investment intentions in some other sectors are emerging, but these plans remain tentative as firms wait for more evidence of improved conditions before committing to significant expansion.

“Public spending is scheduled to be subdued. Overall, the bank still expects growth to be a little below trend over the year ahead.”

The decisions new figures from RP Data showing dwelling values lifted by 1.4 per cent across the nation’s capital cities in June.

In Perth, house value lifted by 1.1 per cent.

RP research director Tim Lawless said with some heat coming out of the housing market, the Reserve was likely to sit on the interest rate sidelines for an extended period.

“It is looking increasingly like the official cash rate will remain at its low setting, at least for the remainder of this year, which should continue to support housing demand,” he said.

“Capital gains over the past financial year were recorded at 10.1 per cent across the combined capital cities, however we are expecting growth rates to wind down over the coming financial year as natural affordability constraints and low rental yields in the largest capital cities work to slow the rate of capital gains.”

The West Australian

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