RBA keeps rates on hold

Tuesday, 1st Mar 2016
Categories: Market News, Newsletter

The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 2% during its March board meeting.

Announcing the decision to leave rates on hold, RBA governor Glenn Stevens said there were reasonable prospects for growth in the Australian economy, while inflation remained in check.

“Inflation is quite low. With growth in labour costs continuing to be quite subdued as well, and inflation restrained elsewhere in the world, inflation is likely to remain low over the next year or two,” Mr Stevens said, adding that this provided scope for further rate cuts if necessary.

The official cash rate has remained at 2% since May 2015 when the RBA cut the rate down from 2.25%.

Mr Stevens pointed to improved prospects in non-mining sectors in Australia, which had expanded and strengthened in 2015.

“This was reflected in improved labour market conditions. The pace of lending to businesses also picked up,” he said.

“Over the period ahead, new information should allow the board to judge whether the improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand,” he said, referring to recent volatility on global financial markets.

He also said a clampdown on loans to investors had worked to ease the overheated property markets in Sydney and Melbourne, “where dwelling prices had since “moderated”.

“Credit growth to households continues at a moderate pace, albeit with a changed composition between investors and owner-occupiers,” he said.