Reserve Bank of Australia keeps key rate unchanged, repeats view it has scope for easing

The Reserve Bank of Australia kept its cash rate unchanged at 3 percent as expected and repeated its view that there is scope to ease policy if necessary to support demand.

Today’s statement contains almost identical language to the March 6 statement.

“Inflation is consistent with the medium-term target, with both headline CPI and underlying measures at around 2¼ per cent on the latest reading,” Governor Glenn Stevens said. “Labour costs remain contained and businesses are focusing on lifting efficiency. These trends should help to keep inflation low, even as the effects on prices of the earlier exchange rate appreciation wane.”

The Australian dollar increased to $1.0467 after the statement from $1.0459 immediately before. The kiwi dollar was little changed at 80.26 Australian cents from 80.25 cents.

Stevens repeated that the peak in resource investment nearing and there will be scope demand to strengthen in other areas of the economy.

He said global growth is forecast to be “a little below average for a time, but the downside risks appear to be reduced.” While Europe remains in recession, the US is “experiencing a moderate expansion and growth in China has stabilised at a fairly robust pace.”

“Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs of stabilisation,” Stevens said.

“Internationally, financial conditions are very accommodative,” he said. “Risk spreads are narrow and funding conditions for financial institutions have improved. Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Borrowing conditions for large corporations are similarly very attractive.”