The Reserve Bank of Australia (RBA) has kept the official cash on hold at 2 per cent.
The decision came after two rate cuts already this year in February and again in May.
Explaining today’s decision, the Reserve bank again noted further softening in conditions in China and east Asia, alongside a slip in key commodity prices.
Emphasis was placed on expectations that US Federal Reserve will increase its policy rate over the period ahead but it was qualified with a suggestion that other countries are still pushing rates lower.
The Reserve Bank noted that moderate expansion in the domestic economy continues, if somewhat below longer-term averages. Stronger growth of employment further encourages the RBA’s view that accommodative monetary policy is key to supporting borrowing and spending.
The Australian Dollar continues to adjust to significant declines in key commodity prices. Nonetheless the lower exchange rate remains supportive of inflation, which is forecast to remain consistent with the central bank’s target over the next one to two years.
While strong housing prices in Sydney and Melbourne were mentioned the RBA said regulatory measures are helping to contain housing-related risks.
But for now the RBA says the current cash rate is appropriate and it will assess conditions in the period ahead to to determine whether the current policy will foster sustainable growth and inflation consistent with the target.
The Aussie dollar was quick to react with an immediate surge higher against the greenback, pushing above $US0.71.
