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RBA surprisingly leaves interest rate unchanged
The Reserve Bank of Australia held its overnight cash rate at 2.25 per cent on Tuesday, one month after cutting the rate. The market had rated the chance of a second cut in as many months at about 60 per cent. However, the central bank signalled that there is a possibility for a cut over the next few months.
In February the RBA cut the benchmark rate by 25 basis points, bringing it down to its lowest level since the 1950s.
The Governor of the RBA Glenn Stevens made a statement after the rate announcement and said “further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target.
“The board will further assess the case for such action at forthcoming meetings,” Stevens added.
On the economy, the RBA Governor said it was still growing at a below trend pace and the Australia dollar is still too high, but it was appropriate to hold the cash rate steady for the time being after last month’s reduction.
‘Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target,’ he said.
The Australia dollar reacted sharply to Tuesday’s decision, surging about US0.40¢ to around US78.20¢ before slipping again because of the bank’s obvious easing bias.
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