RBA leaves rates on hold

Tuesday, 3rd Mar 2015
Categories: Market News, Newsletter

The Reserve Bank of Australia (RBA) has left the official cash rate on hold at 2.25% during its March meeting.

Announcing the decision, RBA governor Glenn Stevens said the bank, having cuts rates at its previous meeting in February, judged that it was appropriate to hold interest rates steady for the time being.

However, he said a rate cut may be needed in the future.

“Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target,” Mr Stevens said.

“The board will further assess the case for such action at forthcoming meetings.”

Mr Stevens reiterated his comments from last month saying that credit growth was moderate, with stronger lending to property investors.

“Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months,” Mr Stevens said.

“The bank is working with other regulators to assess and contain risks that may arise from the housing market. In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.”

Last month the RBA cut rates by .25% to their current record low. It was the first time the official cash rate had changed since August 2013.

In its March meeting, Mr Stevens also reiterated that growth in Australia was continuing at below-trend pace, with domestic demand growth overall weak.

“The economy is likely to be operating with a degree of spare capacity for some time yet. With growth in labour costs subdued, it appears likely that inflation will remain consistent with the target over the next one to two years, even with a lower exchange rate,” Mr Stevens said.

He noted that the Australian dollar had continued to decline in value against the US dollar, however less so against other currencies.

“A lower exchange rate is likely to be needed to achieve balanced growth in the economy,” he said.