The RBA has again left the cash rate untouched, and rates may stay on hold longer than previously expected.
At its July board meeting yesterday, the Reserve Bank indicated that slowing employment growth, modest credit demand and softening asset prices as reasons for a continued cash rate freeze. The Bank also noted that temporary price shocks from natural disasters earlier in the year are expected to dissipate, leaving inflation close to the Bank's target range over the next 12 months.
Stevens conceded that recovery following this year's floods and cyclones was proceeding slower than expected, and that growth for 2011 was now not expected to be as strong as previously predicted.
However, the Bank has questioned whether moderate growth of global economies and inflationary pressures will continue. In a statement following the decision, RBA governor Glenn Stevens stated that a number of other countries have tightened monetary policy. Stevens pointed to Australia's high terms of trade and growth in national incomes.
"Investment in the resources sector is picking up strongly in response to high levels of commodity prices and the outlook remains very positive. A number of service sectors are also expanding at a solid pace," he said.
