RBA keeps key rate at record low 2% pending data

Reserve Bank of Australia keeps key rate at record low 2% pending data

By Jonathan Underhill

June 2 (BusinessDesk) - The Reserve Bank of Australia kept the cash rate at a record low 2 percent, saying it was appropriate to leave policy unchanged while it assesses the impact of policy on sustainable economic growth.

Governor Glenn Stevens said that in the face of economic growth below its long-term average, weakness in business capital spending in mining and other sectors, subdued public spending, spare capacity in the economy and slow growth in labour costs "monetary policy needs to be accommodative."

"Having eased monetary policy last month, the board today judged that leaving the cash rate unchanged was appropriate at this meeting," Stevens said. "Information on economic and financial conditions to be received over the period ahead will inform the board's assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target."

Stevens reiterated his comments from a month ago that "further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."

He also repeated last month's observation that global financial conditions remain "very accommodative" and long-term borrowing rates for sovereigns and creditworthy private borrowers "remain remarkably low". Inflation was expected to remain consistent with the bank's target over the next one to two years, even with the lower exchange rate, he said, recycling last month's language.

The Australian dollar climbed to 76.78 US cents from 76.30 cents before the statement was released. The kiwi dollar fell to 92.66 Australian cents from 93.11 cents.

(BusinessDesk)

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