RBA 'comfortable' with 4.5% rate

Wednesday 18 August 2010

Article by Mozo

Newly released minutes show that the Reserve Bank of Australia (RBA) was "comfortable" with leaving interest rates at 4.5 per cent at its board meeting earlier this month, suggesting a continued pause in rate movements is likely.

The minutes reveal that with all economic data close to trend, the RBA board felt it was appropriate to keep the official cash rate on hold pending further information.

"By May, interest rates on loans to households and businesses had returned to around average levels," the minutes said.

"In the subsequent two months, with economic growth close to trend and inflation expected to decline to the target range later in the year, the board had felt comfortable with the existing level of interest rates, particularly in an environment where there was a significant degree of market volatility."

In addition, the RBA confirmed its updated forecast for GDP growth of between 3.75 and four per cent in 2011 and 2012.

The bank also stated that while underlying inflation could be expected to remain around 2.75 per cent over the next year, it was forecast "to pick up a little thereafter".

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