Finance Finance News Interest rates steady as RBA says ‘no change’
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Interest rates steady as RBA says ‘no change’

Reserve Bank of Australia
Australia has been named as one of the economies vulnerable to a rate rise. Photo: AAP
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Interest rates have been left on hold by the Reserve Bank of Australia at its June meeting.

The decision to keep rates steady, widely predicted by economists and market watchers, followed the decision in May to cut the official cash rate to 1.75 per cent, a historic low.

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RBA governor Glenn Stevens said the economy had been growing at a slower than average pace and that inflation was expected to remain low for quite some time.

He said conditions in financial markets had steadied after a “period of volatility” earlier in 2016.

Mr Stevens said the board was content to keep rates on hold for the time being.

“Holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time,” Mr Stevens said in a statement.

“Low interest rates have been supporting domestic demand and the lower exchange rate overall is helping the traded sector.”

The Australian dollar jumped on the news. It was trading at 73.7 US cents prior to the release, and is now buying 74.1 US cents.

Last month the RBA moved to head off fears about deflation, cutting its official cash rate by 25 basis points.

Economists said it was surprising the RBA decided not to give a firm indication of any easing bias going forward.

“We had thought they would reveal some sort of easing bias today, they haven’t done that. At this stage we are looking for the cash rate lower,” Tom Kennedy, economist at JP Morgan, told Reuters.

“We’ve got August and we think you’ll see a 25 bps cut there, we still think there are some structural challenges facing the RBA and they’re going to need to lower the cash rate again in the first half of next year.”

Many economists are tipping for another rate cut in August, which would give the Reserve bank time to digest inflation figures which are due out on July 28.

– with AAP and ABC

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