RTTNews - Board members of the Reserve Bank of Australia did not see a pressing case for any further action at its monetary policy meeting held on June 2, the minutes of the session showed Tuesday.
Members were of the view that the inflation outlook provided affordable scope for some further easing of monetary policy, if that were to be needed to support demand at a later stage. Accordingly, the board decided to retain its interest rate at a 49-year low of 3%.
Members judged that maintaining the current stance of monetary policy for the time being would be consistent with fostering sustainable growth and low inflation, and would leave adequate flexibility to respond to developments as needed over the period ahead, the minutes stated.
The Australian economy is also experiencing a downturn, but this is less severe than in most other nations. The economy is set to witness a fairly gradual expansion later in the year, with spare capacity tending to rise and inflation likely to ease.
Along with significant support to demand, monetary policy also eased considerably. The central bank has slashed the cash rate by 125 basis points since December 2008. The board noted that these policies were having some impact, though the full effects would take time yet to be seen.
Over the last month, the Australian dollar appreciated against most of the currencies, especially the US dollar. This had lowered the stimulus that the economy had received on earlier weakness. The movement suggested that changes were more reflective of altering sentiment towards the US dollar and risk appetite more generally.
In its statement, the RBA said, In Australia, following some stronger economic data, market pricing suggested that the cash rate was expected to be held steady at this meeting, but there was still thought to be a possibility of further easing in the months ahead.
According to Westpac chief economist Bill Evans, there is very little chance that the RBA will cut rates again over the coming few months. However, it stands ready to move should unforeseen developments emerge.
The jobless rate forecast of the government is three percentage points above the current levels. Evans said, The trauma of such a move, if it is occurring at the same time that the stimulus packages are wearing off, and the global economy remains in recession, might see the reasonably confident mood depicted in these minutes change quickly.
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