Kieran Bicheno

Reserve Bank keeps interest rates at 2%

AS EXPECTED, the RBA has kept the cash rate unchanged at 2.00%, for the 10th straight meeting.

While the decision came as no surprise the continuing strength of the Australian dollar has some analysts thinking a rate rise could be an option in May.

In his statement following the meeting Reserve Bank Governor Glenn Stevens said "sentiment in financial markets has improved recently after a period of heightened volatility. However, uncertainty about the global economic outlook and policy settings among the major jurisdictions continues. Funding costs for high-quality borrowers remain very low and, globally, monetary policy remains remarkably accommodative.

In Australia, the available information suggests that the economy is continuing to rebalance following the mining investment boom. Consistent with developments in the labour market, overall GDP growth picked up over 2015, despite the contraction in mining investment. The pace of lending to businesses has also picked up.

Inflation is quite low. Recent information has confirmed that growth in labour costs remains quite subdued. Given this, and with inflation also restrained elsewhere in the world, inflation in Australia is likely to remain low over the next year or two."

The Aussie dollar jumped nearly half a cent to the day's high of 76.32 US cents on what traders describe as the RBA putting some mild pressure on the Aussie dollar.


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