The Reserve Bank of Australia (RBA) left the cash rate unchanged following its meeting today, citing on-trend growth and inflation.
Following on from a 25 basis points cut when the board last met in June, Governor Glenn Stevens said international financial markets have stabilised somewhat in the last month, due to progress toward longer-term sustainability in Europe. Despite this, he said share markets have remained volatile.
Locally, Stevens said recent data suggests the economy grew more strongly than originally thought in the first half of 2012.
“Labour market conditions also firmed a little, notwithstanding job shedding in some industries; the rate of unemployment remains low,” he said.
The RBA said its inflation outlook hasn’t changed, but that interest rates for borrowers have declined, to a little below medium-term averages.
It also said business credit has increased more strongly in recent months, though growth remains modest.
“As a result of the sequence of earlier decisions, there has been a material easing in monetary policy over the past six months. At today’s meeting, the Board judged that, with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate,” Stevens added.
Last month’s rate cut to 3.5 percent was intended to stimulate growth in the economy, however not all the banks passed on the full 25 basis points cut.