The Reserve Bank of Australia (RBA) has decided to keep its cash rate at an historicallow of 2.5 per cent in its September meeting.
The move was largely anticipated by analysts with a broad view that rates won’t rise until 2015.
RBA governor Glenn Stevens says continued accommodative monetary policy should provide support to demand and help growth to strengthen over time.
In similar sentiment to last month he said the most prudent course is likely to be a period of stability in interest rates.
Mr Stevens noted indicators of gradually improving business conditions and some recovery in household sentiment, adding that resources sector investment spending is starting to decline significantly.
The central bank re-asserts that it sees the labour market having a degree of spare capacity and that it will probably be some time yet before unemployment declines consistently.
Mr Stevens conceded the exchange rate remains above most estimates of its fundamental value, particularly given the declines in key commodity prices.
The statement says the Bank still expects growth to be a little below trend over the year ahead.
Prior to today’s announcement - FNN spoke to Savanth Sebastian from Commsec, about how much influence a growing unemployment rate would have on the decision by the Reserve Bank:
“I don’t think The Reserve Bank will be wanting to cut rates, unless you saw a huge spike in unemployment from here. Keep in mind that somewhat perversely maybe The Reserve Bank would be quite encouraged by this latest result (unemployment) because it pushed down the Australian dollar and that’s something that they’ve wanted to do for a number of months and they weren’t able to push it down but these number certainly did and it’s holding a lot lower then where it was in the last month or so.”
