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The Reserve Bank of Australia s offices in Sydney. Picture: AAP.
The Reserve Bank of Australia's offices in Sydney. Picture: AAP.

The Reserve Bank has kept official interest rates on hold at its last board meeting for the year, increasingly confident the economy is picking up speed.

Following its monthly meeting the bank kept the cash rate at an equal 54-year low of 2.5 per cent.

Markets had put just a 6 per cent chance on a rate cut.

Governor Glenn Stevens said in a statement that the local economy continued to grow a little below trend with unemployment edging up, adding that this was likely to persist “in the near term”.

He said it was expected that private demand outside of the mining sector was expected to pick up.

Current low rates were starting to have an impact.

“The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values,” he said.

“The full effects of these decisions are still coming through, and will be for a while yet.

“The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households.”

Mr Stevens noted there had been an increase in consumer and business confidence but warned it was still unclear how persistent this would be.

The governor also continued his commentary on the strong Australian dollar.

“The Australian dollar, while below its level earlier in the year, is still uncomfortably high,” he said.

“A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.”

The decision came as new retail trade figures show consumers spent up through October.

Total retail sales grew by 0.5 per cent following an upwardly revised 0.9 per cent jump in September.

But the slowdown in WA’s mining sector continues to be felt by the State’s retailers.

While WA retail grew by 0.6 per cent, the annual rate has now slipped below one per cent.

It is at its lowest annual rate since the depths of the Global Financial Crisis.