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Interest rates on hold

The Reserve Bank of Australia (RBA) announced that the cash rate would remain at 3.0 percent earlier today.

RBA governor Glenn Stevens said the Board’s decision to leave the cash rate unchanged was largely due to lower than expected economic growth and steady inflation.

Global growth is expected to remain below average for some time but there is light at the end of the tunnel with the economic expansion in the US, a reduced financial burden in Europe and stabilised growth in China.

“The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time,” said Stevens.

The RBA noted the following key changes to the world economy:

  • Sentiment in financial markets has improved considerably since mid last year
  • Risks have narrowed and funding conditions for financial institutions are now more favourable
  • Long-term interest rates faced by highly-rated independent nations, including Australia, remain exceptionally low
  • Borrowing conditions for large corporations are very attractive
  • Share prices have risen substantially from their low points

The Board also acknowledged the task of putting private and public finances on sustainable paths in several major countries is still far from complete, as seen quite recently in Europe, where financial markets remain vulnerable to occasional setbacks.

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Staff Writer

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