July 03, 2014
At Tuesday’s Reserve Board of Australia meeting, the Board decided to leave the cash rate unchanged at 2.5%. This is the tenth consecutive month that the Board has decided to leave the cash rate unchanged.
Reasons behind this decision include moderate growth in the global economy, which is helped by firmer conditions in advanced countries. Financial conditions overall remain very accommodative. Long-term interest rates and risk spreads remain low.
In Australia, recent data still shows good growth, and it is pleasing to see there is still strong expansion in the housing construction market. Once again dwelling prices increased significantly over the past year, though there have been some signs of moderate increases recently. Consumer demand has also shown signs of moderate increases, while growth in wages has declined somewhat. There are small signs that the employment market has improved slightly.
Looking ahead, the RBA has indicated that inflation is expected to remain consistent and that the most prudent course is likely to be a period of stability in interest rates.
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