IMF suggests RBA is 'right to hold interest rates'

The International Monetary Fund (IMF) has asserted that the Reserve Bank of Australia (RBA) is in a position in which it can afford to maintain interest rates at their current level.

Recent analysis by the organisation asserted that this was the case despite increases in the cost of food and consumer price inflation being above the target band.

The cash rate is currently at 4.75 per cent, a level set in November last year and which has been maintained since then despite expectations that it will be altered.

"In economies where the central bank's credibility is strong, as reflected in well-anchored inflation expectations, and where there is substantial economic slack, monetary policy can remain accommodative," the IMF report stated.

It suggested that this is the case even when the headline inflation rate is higher as a result of the rising cost of food.

However, there are calls for the RBA to reduce the cash rate in the near future, with Westpac chief economist Bill Evans among those pressing for this, suggesting that it will help prevent a rise in unemployment figures.

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