Australia’s central bank retained its record interest rate for the ninth straight meeting and reiterated its stance on further easing going forward.
The policy board of the Reserve Bank of Australia, governed by Glenn Stevens, left the cash rate unchanged at 2.00 percent. The move was in line with economists’ expectations.
Policymakers judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate.
Members noted that continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand.
“Over the period ahead, new information should allow the Board to judge whether the improvement in labor market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand,” the bank said in a statement.
Bill Evans at Westpac Banking Corporation said the Board is still some way away from delivering on this easing bias. Policymakers have ample time to be convinced, particularly about the labor market and the impact of global financial turmoil, the economist said.
The Australian Bureau of Statistics is slated to release the fourth quarter GDP data on Wednesday. The economy is expected to grow at a slower pace of 0.5 percent in the fourth quarter following a 0.9 percent expansion posted in the previous three months.
The bank also observed that the global economy is continuing to grow at a slightly slower pace than earlier expected and China’s growth continued to moderate.
“Financial markets have once again exhibited heightened volatility over recent months, as participants grapple with uncertainty about the global economic outlook and policy settings among the major jurisdictions,” Stevens said.
Commodity prices have declined very substantially over the past couple of years. This partly reflects slower growth in demand, but also large increases in supply.
Stevens reiterated that the exchange rate has been adjusting to the evolving economic outlook.
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