RBA holds key rate unchanged, says settings 'above average'

RBA keeps key rate at 4.75%, says it’s appropriate for economic outlook

Dec. 7 (BusinessDesk) – The Reserve Bank of Australia kept its target cash rate at 4.75%, as expected, with Governor Glenn Stevens saying monetary policy is “appropriate for the economic outlook.”

The RBA held rates unchanged after a surprise quarter-point hike last month, its seventh since it embarked on tightening monetary policy in October 2009. Stevens said private investment is beginning to pick up in Australia, and the caution in household spending has led to a “noticeable increase” in savings.

“Following the Board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average,” Stevens said in a statement. “The Board views this setting of monetary policy as appropriate for the economic outlook.”

Stevens said the Australian dollar’s appreciation this year, which saw it touch parity with the greenback last month, will help contain inflation pressure, which is expected to stay in check in the coming quarters.

The Australian dollar was little changed at 99.12 U.S. cents from 99.08 cents immediately before the announcement, while the kiwi rose to 76.17 U.S. cents from 76.09 cents. The New Zealand dollar gained to 76.85 Australian cents from 76.75 cents before the announcement.

Traders are betting New Zealand’s interest rates will increase faster than their trans-Tasman neighbour’s over the coming year, with 69 basis points hikes priced into the official cash rate compared to 24 points for Australia’s benchmark rate, according to the Overnight Index Swap curve.

(BusinessDesk)

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