RBA Signals “Steady Interest Rates”

Australia’s central bank said a period of steady interest rates is likely as record-low borrowing costs and a weaker currency aid growth and it monitors prices after a surprising acceleration in inflation.

“There were further signs that the expansionary setting of monetary policy was having the expected effects,” the Reserve Bank of Australia said in minutes released today of its Feb. 4 meeting, where it kept the benchmark rate unchanged at 2.5 percent. “The board noted that it was likely the inflation reading contained some noise as well as some signal about inflationary pressures, but also presented something of a puzzle in interpreting the mix of activity and price data.”

Markets and economists predict the central bank will likely leave rates unchanged this year to avoid a growth gap emerging as mining companies plan fewer projects. Low borrowing costs are driving up home prices, indicating the RBA may be reluctant to add to 2.25 percentage points of rate cuts since late 2011 even as unemployment rose to the highest level in more than 10 years.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.