RBA continues rate freeze

The Reserve Bank of Australia Board has left the official cash rate unchanged at 4.75 percent at its meeting today

June 7, 2011

The Reserve Bank of Australia Board has left the official cash rate unchanged at 4.75 percent at its meeting today, on the back of poor GDP figures and slowing employment growth.

Interest rates have remained on hold for the past six months, with the last rise being 25 basis points in November last year.

RBA Governor Glenn Stevens says the floods and cyclones over the summer have reduced output in some key sectors.

"The resumption of coal production in flooded mines is taking longer than initially expected, but production levels are now increasing again and there will be a mild boost to demand from the broader rebuilding efforts as they get under way," Stevens says in a statement.

"Over the medium term, overall growth is likely to be at trend or higher," he says.

According to Stevens, growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5 percent.

"Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term," he says.

Overall credit growth remains quite modest, while signs have continued to emerge of some greater willingness to lend.

Stevens says business credit has expanded this year after a period of contraction, yet growth credit to households has softened.

"CPI inflation has risen over the past year, reflecting the effects of extreme weather and rises in utilities prices, with lower prices for traded goods providing some offset," he says.

"The weather-affected prices should fall back later in the year, though substantial rises in utilities prices are still occurring."

The Bank predicts CPI inflation will be close to target over the next 12 months. It will adjust future rate rises accordingly.

"At today's meeting, the Board judged that the current mildly restrictive stance of monetary policy remained appropriate," Stevens says.

"In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation," he says.

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