The Reserve Bank in its first monthly meeting for 2014 have left interest rates unchanged. Interest rates have been left at the level of 2.5% since August 2013.
In the Reserve Bank of Australia’s announcement provided at 2.30pm this afternoon the Reserve Bank appeared to suggest that rates will be left at this level for an extended period of time. Specifically the Reserve Bank indicated a level of stability in interest rates was required as the most prudent measure of monetary policy at this stage.
The Reserve Bank was silent on the level of the exchange rate (as measured against the US Dollar). This could appear that the Reserve Bank is more comfortable with its level. The Reserve Bank did note that a lower Australian Dollar might assist in the balancing growth of the economy.
The Reserve Bank did note that inflation was higher than expected. This could be due to any number of factors, however the most likely is the impact of flow through given the lower Australia dollar. It noted that wage growth was negligible and unemployment was rising with limited growth in demand.
Overall the Reserve Bank appeared fairly happy with the direction of the Australian economy. They were pleased that consumer spending had improved as had demand for credit. In the Board’s judgement, “monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target”.