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RBA leaves rates on hold

The RBA acknowledged the higher funding costs for domestic money lenders but reiterated that these costs were not exceptional and remain close to the long term average.
The RBA acknowledged the higher funding costs for domestic money lenders but reiterated that these costs were not exceptional and remain close to the long term average. Kieran Salsone

THE Reserve Bank of Australia (RBA) has decided to leave the official cash rate unchanged at 4.25%.

A statement released by RBA Governor Glenn Stevens stated the decision was highly influenced by the international economy, with Europe's economic growth expected to be sluggish but predictable.

"Several European countries will record very weak outcomes, but the US economy is continuing a moderate expansion," Stevens said.

China's lower than normal growth forecast was also a determining factor.

Stevens was guardedly upbeat about the health of the domestic economy.

"Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change," he said.

"Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months.

"CPI inflation has declined as expected and will fall further over the next quarter or two."

The RBA acknowledged the higher funding costs for domestic money lenders but reiterated these costs were not exceptional and remain close to the long term average.

The decision to keep the official interest rate steady does not give any indication as to what Australian money lenders will do with their own variable interest rates.

Topics:  cash rate glenn stevens interest rates rba



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