The Reserve Bank has kept rates steady at 4.25%, saying monetary policy settings remain appropriate, with growth expected to be close to trend and inflation close to target.
The decision was largely expected, and is the second consecutive halt after the two rate cuts that brought 2011 to a close. The central bank says it expects inflation to fall within its desired 2-3 percent range over the next couple of years.
“Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring,” RBA governor Glenn Stevens said in a statement.
“The acute financial pressures on banks in Europe have been alleviated considerably by the actions of policymakers, though there is more to do to put European banks and sovereigns onto a sound footing for the longer term and Europe will remain a potential source of shocks for some time yet.”
“Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change.”
The bank added that although interest rates for borrowers have generally risen since last month’s meeting, they remain close to the medium-term average.
“With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy.”
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