Australia Leaves Record Low Interest Rate Unchanged
September 02 2014 - 2:23AM
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Policymakers of Reserve Bank of Australia decided to maintain
its record low interest rate once again as they continue to assess
that the most prudent course is a period of stability in interest
rates.
The monetary policy board retained the cash rate at 2.50
percent. The rate has been at the current level since August
2013.
The bank has reduced its benchmark rate by a cumulative 225
basis points since November 2011 so as to help economic growth and
also to bring down overvalued currency.
The bank said the exchange rate remains above most estimates of
its fundamental value, particularly given the declines in key
commodity prices. Consequently, it is offering less assistance than
would normally be expected in achieving balanced growth in the
economy.
Policymakers said continued accommodative monetary policy should
provide support to demand and help growth to strengthen over time.
Inflation is expected to be consistent with the 2-3 percent target
over the next two years.
Interest rates are likely to remain at their current low level
much longer into 2016 and that, if there are any policy changes in
coming months, it is more likely that rates will be cut than hiked,
Krystal Tan, an Asia economist at Capital Economics.
The bank expects growth to be a little below trend over the year
ahead despite the economy growing moderately.
The Australian Bureau of Statistics is set to publish its second
quarter GDP data on September 3. The second quarter growth is
forecast to slow to 0.4 percent on a sequential basis from 1.1
percent in the first quarter.
In the second quarter, the current account deficit widened to
A$13.7 billion from A$7.8 billion in the first quarter, the
statistical office reported today. The ABS said the shortfall is
likely to subtract 0.9 percentage points from the second quarter
GDP growth.