RBA minutes explain interest rates decision

Tuesday 21 February 2012

Article by Mozo

The minutes for the Reserve Bank of Australia's (RBA) February board meeting have been released and they go some way to explaining the organisation's decision not to make cuts to interest rates.

Economists had predicted that rates would once again be slashed, following on from two cuts in November and December 2011.

While this would have been good news for home loan customers, those who hold term deposits were not so keen on a readjustment.

However, the RBA opted not to sanction another 0.25 per cent drop, as the board felt that economic growth was falling in line with forecast trends and that inflation would remain steady, the minutes showed.

The major factor that would have encouraged the RBA to make a further cut was the eurozone crisis, but the situation was not deemed bad enough to warrant an interest rate reduction.

"While the financial situation in Europe remained fragile, the likelihood of an extremely bad outcome seemed to have diminished somewhat over the previous couple of months," the minutes noted.

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RBA minutes explain interest rates decision
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