RBA continues rate freeze 1

Reserve Bank Board keeps the official cash rate on hold at 4.75pc for the fifith month in a row at today's meeting

RBA continues rate freeze 1
RBA continues rate freeze
April 5, 2011

The recent disaster in Japan and moderation in employment growth has seen the Reserve Bank of Australia keep rates on hold for the fifth month in a row.

At its meeting today, the RBA board decided to leave the official cash rate unchanged at 4.75 percent.

RBA Governor Glenn Stevens says Japan’s earthquake and subsequent tsunami will have a noticeable effect on Japanese production in the near term, although the impact on the broader Asian region is expected to be limited.

"Commodity prices, including oil prices, have risen over recent months, pushing up measures of consumer price inflation in many countries," Stevens says in a statement.

He says while a number of countries have been moving to tighten their monetary policy settings, financial conditions for the global economy remain "accommodative".

According to Stevens, Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly.

"Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices," he says.

However, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income.

"The natural disasters over the summer have reduced output and the resumption of coal production in flooded mines is taking longer than initially expected," Stevens says.

"Production levels should, however, recover over the months ahead, and there will be a mild boost to demand from the rebuilding efforts as they get under way," he says.

The RBA says business balance sheets generally are being strengthened, and the run up in household leverage has abated.

Meanwhile, growth in employment has moderated over recent months and the unemployment rate has held steady at 5 percent.

Overall, looking through temporary effects, the Bank expects that inflation over the year ahead will continue to be consistent with the 2 to 3 percent target.

"At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook."

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