The Reserve Bank of Australia has announced it has left the official cash rate unchanged at 4.25 per cent.

 

In a statement issued on the RBA website, Governor Glenn Stevens said that moderate growth in the US, coupled with an artificial economic cooling in China and the ongoing European debt crisis had all contributed to the decision to leave the cash rate unchanged.  Mr Stevens also said the ongoing strength of the commodity sector informed the decision.

 

The RBA has also cited considerable alleviation of financial pressures on European banks as another contributing factor in the decision.

 

“Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made. Financial market sentiment, though remaining skittish, has generally improved since early December. Share markets have risen and term funding markets have re-opened, including for Australian banks, albeit at increased cost compared with the situation prevailing in mid 2011,” Mr Stevens said.

 

The RBA found that credit growth is continuing modestly, bolstered somewhat by a ‘slight increase’ in demand for credit by businesses. Housing prices have ‘showed signs’ of stabilising at the end of 2011 after a month long decline.

 

“At today's meeting, the Board noted that interest rates for borrowers have declined to be close to their medium-term average, as a result of the actions at the Board's previous two meetings. With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment,” Mr Stevens concluded.