RBA Rate Unchanged! – Pressure Off Banks

07/02/2012 3:33 am

At its meeting today, the RBA Board decided to leave the cash rate unchanged at 4.25%, defying expectations of a third rate cut in a row. Governor Glenn Stevens, and the RBA Board have taken the view that the overall economic situation looks more stable than when the board meet in December. We have seen growth in the US, increased stability in Europe, and talk of a softer slowdown in the Chinese economy.

"Recent data from the United States suggest a continuing moderate expansion after a soft patch in mid 2011,'' RBA Governor Glenn Stevens said in  his statement accompanying the decision. "Growth in China has moderated as was intended, but on most indicators remained quite robust through the second half of last year." He said.

Statement by Glenn Stevens, Governor: Monetary Policy Decision

The pressure is now right off the banks for this month.  A number of the banks had indicated that they may not pass on another rate cut by the central bank because their own borrowing costs are continuing to rise.  Stevens did not close the door on future rate cuts in his statement. Borrowers will have to wait at least another month for more interest rate relief.

"Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy," Mr Stevens said in the statement. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary.