The Reserve Bank of Australia (RBA) has held its fire and, as expected, kept the official cash rate on hold for its sixth straight meeting. Australia’s key cash rate now sits at record low of 2.5 per cent.
Commenting on today’s decision the RBA noted there are reasonable prospects for global growth to pick-up this year, after remaining a bit below trend last year. The bank sees America’s economy as continuing its expansion, the euro area in recovery-mode from recession and China's growth in line with policymakers' objectives. In Australia the RBA says recent information suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction.
The RBA believes current monetary policy is appropriate to foster sustainable growth in demand and keep inflation within its target. Looking ahead the central bank has forecast the most prudent course is likely to be a period of stability in interest rates. The forecast echoes RBS Morgans’ Chief Economist and Director of Strategy Michael Knox who yesterday told FNN rates are likely to remain on hold for this year and the second half of 2015:
“I think [RBA Governor] Glen Stevens will be seen to pursue a policy of masterful inaction this year. I think interest rates are going nowhere this year and I think they’re going nowhere into the second half of next year. And, I think Glen Stevens will keep interest rates exactly where there are, waiting for a recovery in the international economy, particularly the US economy, to lift us out of the slowdown that we’re in.”
