Reserve Bank of Australia keeps cash rates on hold at 2.0% for seventh month

For the seventh month, the Reserve Bank of Australia (RBA) has kept the official interest rate on hold at 2 per cent. However, there are chances there will be further cuts in case the economy stumbles in the first half of 2016.

In a media release on Dec. 1, the RBA has announced that the cash rate would remain unchanged at 2.0 per cent. It says key commodity prices are much lower than a year ago. It shows weaker demand and increased supply, the statement says.

“The global economy is expanding at a moderate pace, with some softening in conditions in the Asian region, continuing US growth and a recovery in Europe,” the RBA statement says.

“The Federal Reserve is expected to start increasing its policy rate over the period ahead, but some other major central banks are continuing to ease monetary policy.”

Reserve Bank officials have repeatedly cited reasons like a weaker Australian dollar for not cutting rates further. RBA Governor Glenn Stevens has also cited strong business and consumer confidence and a still floating housing market as reasons behind the same.

“The more positive conditions are due to the more competitive level of the Australian dollar; the considerable cost savings and other efficiencies that manufacturers have introduced over recent years; and continuing strong demand from residential construction businesses,” The Australian quoted Ai Group Chief Executive Innes Willox as saying.

According to available information, moderate expansion in the economy continues in Australia while there is a large decline in capital spending in the mining sector. GDP growth has been below longer-term averages for a while. However, business surveys show a gradual improvement in conditions in non-mining sectors over the past year, according to the RBA statement.

The Board is going to further assess the outlook and see if the current stance of policy effectively fosters sustainable growth and inflation consistent with the target.

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