Australia Keeps Rates At Record Low
07 July 2015 - 4:25PM
RTTF1
The Reserve Bank of Australia maintained its key interest rate
at a record low for the second straight month as widely expected by
economists.
The policy board governed by Glenn Stevens decided to leave the
cash rate at 2.00 percent. The bank lowered the rates by 25 basis
points each in February and May.
The board judged that leaving the cash rate unchanged was
appropriate at this meeting.
"Information on economic and financial conditions to be received
over the period ahead will inform the Board's assessment of the
outlook and hence whether the current stance of policy will most
effectively foster sustainable growth and inflation consistent with
the target," the bank said in a statement.
Policymakers observed that the Australian dollar has declined
noticeably against a rising US dollar over the past year. Further
depreciation seems both likely and necessary, particularly given
the significant declines in key commodity prices.
Although the bank did not provide a clear hint that more cuts
lie ahead, Paul Dales, chief Australia & NZ economist at
Capital Economics, said he still expects a further weakening in the
outlook to prompt it to reduce rates to 1.5 percent by
December.
According to the RBA, the economy is likely to be operating with
a degree of spare capacity for some time yet. With very slow growth
in labor costs, inflation is expected to remain consistent with the
target over the next one to two years, even with a lower exchange
rate.
The RBA statement was almost similar to the June release, except
on Greece and China.
Despite fluctuations in markets associated with the respective
developments in China and Greece, long-term borrowing rates for
most sovereigns and credit worthy private borrowers remain
remarkably low, the RBA noted.