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RBA cash rate update Feb 2016

RBA cash rate update Feb 2016. The Reserve Bank of Australia left the cash rate on hold at 2% today the 2 February 2016.

 

In the Statement by Glenn Stevens, Governor on the Interest Rate Decision, the reasons given for leaving the cash rate unchanged included:

• mixed economic conditions around the globe;
• declining commodity prices, especially oil prices, and the continuing decline in Australia’s terms of trade;
• volatility in financial markets;
• non-mining parts of Australia’s economy strengthening during 2015;
• improving and above average business conditions;
• employment growth and decreasing unemployment rate;
• increasing lending to businesses; and
• constrained inflation, CPI rising by 1.7 per cent over 2015, with underlying inflation at about 2 per cent & growth in labour costs subdued.

The Governor of the Reserve Bank of Bank did not give any guidance of where interest rates may head in the future with the following statements.

 

At today’s meeting, the Board judged that there were reasonable prospects for continued growth in the economy, with inflation close to target. The Board therefore decided that the current setting of monetary policy remained appropriate. Over the period ahead, new information should allow the Board to judge whether the recent improvement in labour market conditions is continuing and whether the recent financial turbulence portends weaker global and domestic demand. Continued low inflation may provide scope for easier policy, should that be appropriate to lend support to demand.Glenn Stevens, Governor of the Reserve Bank of Australia

 

Commentary

The mixed signals in the global and local (Australian) economy appear to have the Reserve Bank Board uncertain what the future may hold and therefore deciding to keep rates on hold. Regardless of what may happen in the future the current improving employment data and low interest rates are good for borrowers.

 

By Dr Nigel Abery (Ph.D.)

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