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December 2013 RBA Interest Rate Decision: Reserve Bank leaves cash rate unchanged at 2.5%
Topic Started: 3 Dec 2013, 02:30 PM (1,846 Views)
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Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year. Commodity prices have declined from their peaks, but generally remain at high levels by historical standards. Inflation in most countries is well contained.

Overall, global financial conditions remain very accommodative. Volatility in financial markets has abated recently. Long-term interest rates remain very low and there is ample funding available for creditworthy borrowers.

In Australia, the economy has been growing a bit below trend over the past year and the unemployment rate has edged higher. This is likely to persist in the near term, as the economy adjusts to lower levels of mining investment. Further ahead, private demand outside the mining sector is expected to increase at a faster pace, though considerable uncertainty surrounds this outlook. There has been an improvement in indicators of household and business sentiment recently, but it is still unclear how persistent this will be. Public spending is forecast to be quite weak.

Recent data on prices and wages show inflation consistent with the medium-term target. The Bank's assessment is that this is likely to remain the case over the next one to two years.

The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet. The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households. There is also continuing evidence of a shift in savers' behaviour in response to declining returns on low-risk assets. Housing and equity markets have strengthened further over recent months, trends which should in time be supportive of investment.

The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.

At today's meeting, the Board judged that the setting of monetary policy remained appropriate. The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target.
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Rate cut cycle nearing end: economists

The Reserve Bank of Australia is not expected to announce an interest rate cut after its monthly board meeting on Tuesday.

All 14 economists surveyed by AAP say there will be no change to the cash rate, which currently stands at a record low of 2.5 per cent.

Only eight of those surveyed expect a rate cut next year.

The mining and resources investment boom is at, or near, its peak and other parts of the economy are expected to pick up pace and have a more significant role in driving the Australian economy.

Citigroup head of economics Paul Brennan said there is evidence that the Australian economy is starting to rebalance, helped by recent rate cuts.

"The RBA's previous assessment that the influence of previous interest rates cuts working through the economy still holds true and there is data to show that domestic expenditure is slowly improving," he said.

"Housing and equity markets and measures of sentiment have either remained largely stable or strengthened further."

The latest positive signs have been strong housing data on Monday and today's release of an employment index showing job hiring intentions at an 18-month high.

Read more: http://www.businessspectator.com.au/news/2013/12/3/interest-rates/rate-cut-cycle-nearing-end-economists
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RBA keeps rates on hold for Christmas

December 3, 2013 - 3:00PM
Glenda Kwek

The Reserve Bank has kept the official cash rate on hold at its last board meeting of the year.

RBA governor Glenn Stevens said in a statement that current monetary policy settings were appropriate. But he continued to stress that the Australian dollar was "still uncomfortably high".

"The board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target," he said.

The local currency slipped a quarter of a cent after the statement was released, falling to 90.68 US cents just after 2.30pm.

"The guidance given in the December statement was basically unchanged from the November statement, save from a few cosmetic differences," UBS interest rate strategist Andrew Lilley said.

"Other than that, there was no chance in the RBA's stance, which still remains that it's going to be a struggle for the investment part of the economy to hand over growth from mining to non-mining."

The RBA was maintaining an easing bias due to its continued discomfort with the elevated levels of the Australian dollar, but further rate cuts were unlikely, Moody's Analytics associate economist Katrina Ell said.

"The effects of earlier stimulus have started to lift the interest-sensitive sectors and should keep boosting activity through 2014. Residential property is unlikely to be the only stand out performer in coming months," Ms Ell said.

The move, which was tipped by economists and financial markets, came as better-than-expected retail sales figures for October boosted expectations that previous rate cuts were supporting growth in non-mining industries.

Retail sales rose a seasonally adjusted 0.5 per cent in October on the back of increased spending on food, clothing and at restaurants, Bureau of Statistics data released this morning show.

Yesterday, new building approvals data for October remained resilient, slipping slightly but not as much as analysts had expected.

Read more: http://www.smh.com.au/business/the-economy/rba-keeps-rates-on-hold-for-christmas-20131203-2ynxp.html
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mel
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RBA governor Glenn Stevens said in a statement that current monetary policy settings were appropriate. But he continued to stress that the Australian dollar was "still uncomfortably high".

Why the constant talk of the high dollar? The AUD is high on a historical basis, but nowhere near as high as it has been. Why the constant talk about it, and more importantly, what are they going to do about it?
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zaph
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mel
3 Dec 2013, 03:16 PM

Why the constant talk of the high dollar? The AUD is high on a historical basis, but nowhere near as high as it has been. Why the constant talk about it, and more importantly, what are they going to do about it?
I have it on good authority that Stevens has ordered a ute load of lettuce and a few drums of water.
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mel
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what :lol ??
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Gossamer
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No change is good news.
Common sense is a curse - those who have it need to suffer dealing with those who don't have it.

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zaph
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mel
3 Dec 2013, 03:26 PM
what :lol ??
The RBA will influence the exchange rate with a wet lettuce beating.
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mel
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zaph
3 Dec 2013, 06:11 PM
The RBA will influence the exchange rate with a wet lettuce beating.
ah, that makes sense - I thought you were suggesting Glenn was a thirsty rabbit who drives a maloo
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Rates on hold as market slows

December 3, 2013 - 2:52PM
Toby Johnstone

Signs of a slowdown in Australia’s property market would have been welcomed by Reserve Bank which has decided to leave interest rates hold for the next two months, experts say.

It is the fourth month in a row that the RBA has left the official cash rate on hold at 2.5 per cent - the lowest it has been in 60 years. When the bank’s board next meets in February the cash rate will have been on hold for six months.

‘‘From a housing market perspective the RBA would probably have been quite happy to see the rapid rate of home value growth slow in November,’’ senior research analyst at RP Data, Cameron Kusher, said.

The sustainability of recent house price growth has been a topic of debate over the spring selling season.

‘‘We should still be cautious that a bubble could form but with values starting to moderate that will further reduce the risk of bubble-like conditions,’’ said Mr Kusher.

Reserve Bank governor Glenn Stevens indicated a recent speech that there is a need for buyers, especially in hot markets like Sydney, to ‘‘take due care’’.

He has also warned borrowers in Sydney, imploring that ‘‘decisions be based on sensible assumptions about future returns’’.

But after a strong September and October, figures released by RP Data-Rismark on Monday indicated that the market was starting to moderate with capital city dwelling values up by just 0.1 per cent over November.

Last month values in Sydney increased by 0.9 per cent, well below October’s growth rate of 2.4 per cent.

After growing by 1.2 per cent in October, Melbourne values fell back in November, dropping by 2.1 per cent.

Read more: http://smh.domain.com.au/real-estate-news/rates-on-hold-as-market-slows-20131203-2ynxk.html
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