The Board of The Reserve Bank came to a decision on Tuesday (2nd February 2016) to leave the cash rates at 2.0 percent. Current Research indicated that the global economy is continuing to grow but is growing at a slightly slower pace than expected. Rates have been on hold for nine months and remain on hold even though recent economic data shows a downturn of activity both local and international.
Recent information shows that the US growth figures will likely put on hold a follow-up increase in US interest rates. Higher US rates and a higher US dollars would have put downward pressure on the obstinately high Australian dollar and improving the competitiveness of exports. Unfortunately, the pace of growth in dwelling prices has grown less in Melbourne and Sydney over the December quarter and has remained mostly subdued in other cities.
The board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target and therefore decided that the current setting interest rate remained appropriate.
New information will be available over the period ahead which should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand.
At Tuesdays meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target and therefore therefore to keep the current rate unchanged.
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