Australia's central bank retained its record low interest rate for the fifth straight meeting as policymakers concluded it appropriate amid moderation of growth in its key trading partner China.
The policy board of the Reserve Bank of Australia, headed by Glenn Stevens, decided on Tuesday to keep the cash rate unchanged at 2.00 percent. The bank had lowered the rates by 25 basis points each in February and May.
"Further information on economic and financial conditions to be received over the period ahead will inform the Board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target," the bank said in a statement.
At the next monetary policy in November, the bank is slated to review its growth and inflation forecasts.
In providing minimal wording changes the signal seems quite clear that it is unlikely that the Bank will see the need to substantially revise its growth forecasts and therefore need to further ease rates, Bill Evans at Westpac, said.
The latest decision by the RBA demonstrated that the recent falls in equity prices have not increased its appetite for further rate cuts, Paul Dales, chief Australia & NZ economist at Capital Economics, said.
He expects that a more general weakening in the economic outlook for next year, however, will bring rate cuts back onto the agenda soon, with rates eventually falling to 1.5 percent.
The economy expanded only 0.2 percent in the second quarter, following 0.9 percent growth posted in the first quarter.
Based on available information, the RBA expects moderate growth to continue. Although growth remained somewhat below longer-term averages, the labor market showed stronger growth in employment and a steady jobless rate over the past year, the bank said.
Overall, the economy is likely to be operating with a degree of spare capacity for some time yet, with domestic inflationary pressures contained, the bank said. Inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.
The bank observed some further softening in conditions in China and east Asia. Key commodity prices were much lower than a year ago, partly reflecting increased supply.
The Australian dollar is adjusting to the significant declines in key commodity prices, the bank noted.
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