Interest Rates Left On Hold

Posted on March 6th, 2013 · Posted in News

The Reserve Bank has kept official interest rates on hold for the second month in a row today, leaving the official cash rate at 3%.

Since the Reserve Bank board met last month the global economic outlook has continued to improve and a survey of Australian miners’ investment intentions last week indicated the resource boom would last longer than previously anticipated.  The local share market has made substantial gains since December, the unemployment rate has tracked sideways at 5.4%, and retail sales roared back to life in January rising more than what economists expected from December.

Overall financial markets are nevertheless expecting another one or two interest rate cuts by the Reserve Bank over the next 12 months, but some key economists, such as those at HSBC and Commonwealth Bank, expect the next rates move to be up.  While inflation remains subdued the Reserve Bank is unlikely to risk stoking any house price bubble or undermine its ability to cut rates quickly in a genuine crisis, economists say.

In a statement, RBA governor Glenn Stevens said most indicators suggested that economic growth in Australia was close to trend, helped mainly by an increase in investment in the resources sector.

“Looking ahead, the peak in resource investment is approaching, as it does, there will be more scope for some other areas of demand to strengthen,” Mr Stevens said.  “Dwelling investment appears to be slowly increasing, with higher dwelling prices and rental yields.”  Mr Stevens said conditions that were hurting global economic growth had eased in recent months.  “The United States is experiencing a moderate expansion and financial strains in Europe are considerably reduced compared with the situation through much of last year,” he said.  “Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs of stabilisation.”

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