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RBA leaves rates unchanged

The Reserve Bank of Australia (RBA) has left interest rates unchanged at 3.25 percent, citing a rise in inflation as a driving factor behind its decision.

RBA governor Glenn Stevens said a rise in inflation during the September quarter, in part due to the introduction of the carbon tax, was a contributing factor in its decision to hold rates.

“The introduction of the carbon price affected consumer prices in the September quarter, and there could be some further small effects over the next couple of quarters,” he said in a statement.

“With prices data slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being,” he added.

Stevens noted that commodity prices are considerably lower than earlier this year due to unpredictable trends, but are likely to remain higher than in past years.

“The terms of trade have declined by about 13 percent since the peak last year, but they are likely to remain historically high,” he said.

Financial markets have responded positively over the past few months to signs of progress in addressing Europe’s financial problems, but expectations for further progress remains high.

According to Stevens, Australian banks haven’t had any difficulty accessing funding.

“Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels,” he said.

“Capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis,” he added.

Locally, indicators show growth has been running close to trend over the past year, led by very large increases in capital spending in the resources sector.

“Looking ahead, the peak in resource investment is likely to occur next year, at a lower level than expected six months ago,” Stevens said.

“As this peak approaches, the Board will be monitoring the strength of other components of demand,” he added.

The RBA said it will continue to monitor the effects of actions already taken together with information about other factors affecting the outlook for growth and inflation.

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Ashley Calabria

Ashley Calabria

Ashley recently graduated from the University of Canberra with a degree in Journalism and is currently studying Public Policy at the University of Sydney. She enjoys travelling and hanging out with friends, and is interning with Dynamic Business.

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