Finance Finance News RBA’s two-pronged approach: wait and see

RBA’s two-pronged approach: wait and see

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Every month it seems the next move in interest rates recedes another month into the future.

The RBA issued yet another statement flagging a “period of stability in interest rates” after its board’s monthly monetary policy meeting on Tuesday – just as it’s done after every meeting so far this year.

The way things are going, the RBA will be saying the same thing right through to the end of the year.

Rates left at record low

That’s because current economic conditions don’t demand a policy shift and they don’t look like changing much in a hurry.

The pattern of economic growth is boringly familiar.

Economic growth is expected to be “a little below trend over the year ahead” despite signs low interest rates are having a positive effect, the RBA said in its statement.

Inflation is forecast to be “consistent with the two to three per cent target over the next two years”.

And the Australian dollar is “offering less assistance than would normally be expected in achieving balanced growth in the economy” – in other words, it’s too high.

Just as it’s been since export commodity prices starting sliding through late 2011.

So monetary policy is still “appropriately configured”.

And the RBA will stick with its two-pronged policy approach: wait and see.

It has been on the fence, waiting and seeing, since September last year, and that could last for a while longer.

The futures market puts the cash rate at 2.59 per cent in February 2016, a year and half from now, meaning traders think the “period of stability” will probably extend to at least two and a half years.

– AAP

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