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Rates on hold "for some time"


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The Reserve Bank of Australia has kept the cash rate on hold, saying the current level of 2.5 per cent will help to stimulate growth while keeping inflation under control.

In announcing the decision, RBA Governor Glenn Stevens again indicated interest rates were likely to remain on hold for some time.

“On present indications, the most prudent course is likely to be a period of stability in interest rates,” he said.

Mr Stevens also said inflation was likely to be consistent with the RBA’s target range of between two to three per cent for the next two years.

Credit growth was picking up and home prices had increased significantly in the past year, while the unemployment rate had continued to edge higher, Mr Steven said.

Mr Stevens’ statement was almost identical to what he said after the RBA’s March board meeting, CMC Markets chief market strategist Michael McCarthy said.

“He’s saying the cash rate is accommodative at the moment and it’s going to stay that way for some time,” Mr McCarthy said.

“This is an attempt to bolster confidence giving businesses and consumers something to lean on.

“They haven’t given any indication of when they’ll lift interest rates.”

What was not said by Mr Stevens was more important than what he did say, Mr McCarthy said.

“He noted the Australian dollar was still historically high but didn’t attempt to talk it down,” he said.

“He also avoided talking down the Chinese economy.”

JP Morgan economist Ben Jarman also acknowledged the statement was little changed from a month ago, indicating the central bank was waiting to see further developments in the economy.

“There are very few changes today, relative to a month ago,” he said.

But the statement did suggest the RBA was concerned by the recent improvement in the value of the Australian dollar.

“There is a bit of acknowledgement that the currency is not doing quite what it would like,” Mr Jarman said.

If the currency continued to rise, the RBA would likely start talking it down again, he said.

“That’s a space to watch, if it keeps going up they’ll have to start jawboning it again.”

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