Interest Rates Left on Hold

Posted on February 7th, 2013 · Posted in News

Interest rates have been left on hold at 3% with the Reserve Bank adopting a “wait-and-see” stance as signs of recovery in the US boosts the global outlook.  This is good news for savers and Australians planning overseas holidays as this will keep the Aussie dollar well above parity over the coming months.  The decision was widely expected by the market, especially after the release of better economic data from China and the US in recent weeks.

The previous interest rate move was a quarter of a percentage point reduction in December. In 2012 the Reserve Bank cut the cash rate by total of 1.25 percentage points.  In a statement accompanying the decision, RBA governor Glenn Stevens said the fiscal cliff in the US has been avoided, Chinese growth had improved and the financial pressures in Europe have eased.  “Sentiment in financial markets has continued to improve, with risk spreads narrowing and funding conditions for financial institutions becoming more favourable,” Mr Stevens said after the RBA’s first board meeting for the year.  “In Australia, most indicators available for this meeting suggest that growth was close to trend in 2012, led by very large increases in capital spending in the resources sector, while some other sectors experienced weaker conditions.  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 the full impact of the four interest rate cuts in 2012 would take more time to become apparent..

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