The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Sydney / AP
Australia’s central bank held interest rates steady at the all-time low of 1.75 percent on Tuesday following strong growth figures, while keeping an eye on low inflation.
The Reserve Bank of Australia cut the official cash rate from 2.0 percent last month to spur the economy, but gave little indication of further easing in a statement Tuesday.
“The Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time,” Governor Glenn Stevens said.
Lower-than-expected inflation prompted the central bank to make its first rate cut in a year last month, a move seen as keeping a lid on further appreciation in the Australian dollar.
The central bank said on Tuesday inflation remained “quite low” and was expected to stay that way for some time given subdued growth in labour costs and low cost pressures elsewhere in the world.
The currency rose on the news, climbing from 73.70 US cents a few minutes before the announcement to 74.22 US cents soon after.
Australia is enjoying growth which outstrips some of the world’s most advanced economies, and last week defied market forecasts by reporting an annual year-on-year reading of 3.1 percent in the first quarter on the back of strong exports.
The RBA said Tuesday that lower interest rates had supported domestic demand and were helping trade —factors which were assisting the economy to make needed adjustments as it exits a mining investment boom.
Stevens said recent data suggested overall growth was continuing despite a large decline in business investment, but noted room for optimism in areas outside exports.
“Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend,” he said.
“Labour market indicators have been more mixed of late, but are consistent with continued expansion of employment in the near term.”
Economists had widely expected rates to stay on hold after last month’s cut, potentially until the next inflation data due in late July.
“The RBA were never going to cut the cash rate today, but there was always a strong possibility of a clearer easing bias in the last paragraph,” chief market strategist at IG Chris Weston said, referring to the bank’s monetary statement.
“That hasn’t occurred and the RBA have delivered a statement that is fairly dull, uneventful and could give some renewed belief to Australian dollar bulls.”