Interest Rates Unchanged on Cup Day

The Reserve Bank of Australia left Australian official interest rates unchanged today. The rate is currently steady at 2.5%.

Of note in the announcement made just prior to the running of the Melbourne Cup was the relatively weak level of public spending. The Reserve Bank feels this was not going to change short term. Additionally, the Reserve Bank noted that growth in credit was still subdued and although there had been noticeable growth in credit demand there was still some time to go before the full impact of interest rate changes announced during 2013 would take full effect. The Reserve Bank also noted the slight change in asset prices (residential house prices). The Reserve Bank noted that mining investment was now tapering and there was some, but not strong evidence of non mining investment taking over.

The Reserve Bank commented on the persistently high value of the Australian dollar. The RBA implied this was still having effects on areas sensitive to the high value of the dollar.  The Reserve Bank was silent on whether it would use interest rates as lever to reduce the value of the Australian dollar over the short to medium term. However many economists do not see any changes to interest rates (either up or down) coming in the very near future.