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RBA to Sit for Some Time Yet

Australia’s central bank said it’s hard to gauge how much low interest rates will offset a drop in mining investment and tighter fiscal policy, adding that the currency was providing less assistance to rebalancing growth.

“Those uncertainties were likely to take some time to resolve,” the Reserve Bank of Australia said in minutes today of its June 3 meeting, where it kept the benchmark cash-rate unchanged at a record-low 2.5 percent. “The expectation of substantial falls in mining investment, below-average growth of public demand and non-mining investment remaining subdued for a time implied that the pace of growth was likely to be a little below trend over the rest of this year and into next.”

Markets and most economists predict Governor Glenn Stevens and his board will leave borrowing costs unchanged for the rest of this year to spur hiring and avoid a growth gap emerging as mining companies plan fewer projects. The government last month announced a fiscal tightening strategy that may drag on growth and consumer sentiment and, together with weaker data, reinforce the view that rates are likely to remain on hold.

Bloomberg [1]

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