Reserve Bank of Australia Keeps Rate on Hold at 4.25%


The Reserve Bank of Australia (RBA) kept the cash rate on hold at 4.25%.  The RBA said: “With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.”

The Bank previously previously cut the cash rate by 25 basis points at its November and December meetings, meanwhile the RBA last increased the interest rate by 25 basis points in November 2010.  Australia reported annual consumer price inflation of 3.1% in Q4 last year, compared to 3.5% in Q3, 3.6% in Q2, and 3.3% in Q1, and 2.7% in the December quarter of 2010, and only just outside the Bank’s inflation target of 2-3%.  


The Australian economy expanded 1.0% in the September quarter (1.4% in Q3), after contracting -0.9% during the March quarter due to the impact of natural disasters; placing year on year GDP growth at 2.1% in the September quarter, 1.1% in the June quarter, and 1.2% in the March quarter.
The Australian dollar (AUD) has gained about 5% against the US dollar over the past year, after reaching parity and climbing as high as 1.10 last year; the AUDUSD exchange rate last traded around 1.05
The RBA next meets on the 3rd of April this year, and will release its March meeting minutes on the 20th of March.