Reserve Bank of Australia leaves interest rate unchanged

Tuesday, 07. June 2016 06:31

The Reserve Bank of Australia (RBA) decided to keep its key interest rate unchanged, at record low of 1.75%. The decision comes a month after the RBA cut the rate by 25 basis point, and helped the Australian dollar jump against its U.S. counterpart and other major currencies such as the Japanese yen.

The Australian economy saw a healthy growth and it looks like the RBA didn't think the country needed additional stimulus, but that is not to say that everything is perfect.

"Commodity prices are above recent lows, but this follows very substantial declines over the past couple of years. Australia's terms of trade remain much lower than they had been in recent years," said the statement from Governor Glenn Stevens.

The RBA Governor said that "recent data suggest overall growth is continuing, despite a very large decline in business investment," but he observed that domestic demand and export were expanding at "a pace at or above trend."

At the core of the RBA's decision are the following two facts: "Inflation has been quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time."

Turning the attention to the global economy, the RBA governor said it was growing at a slower pace than average, with greater risks for the emerging market economies.

"China's growth rate moderated further in the first part of the year, though recent actions by Chinese policymakers are supporting the near-term outlook," said the RBA governor.

"Taking account of the available information, and having eased monetary policy at its May meeting, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time," concluded Governor Glenn Stevens in a written statement.

The S&P/ASX 200 index slipped from session highs and was up 0.2% at 5,369 points. The ASX All Ordinaries index added 0.11% to 5,439 points.

The Australian dollar jumped 0.92% against the Japanese yen, and was 0.76% higher compared to the U.S. dollar by 6:55 a.m. CET.

 

Image: RBA

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Breaking the News / ZR