SYDNEY (AFP) – Australia’s central bank on Tuesday left interest rates on hold for the 13th-straight meeting, and suggested they would be kept a a record low of 2.5 per cent for some time.
But the Reserve Bank of Australia, which has left interest rates unchanged since August 2013, softened its rhetoric on the local dollar, even as it warned it was still “offering less assistance” to the economy.
Governor Glenn Stevens said in a statement following the bank’s monthly board meeting: “In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target.
“On present indications, the most prudent course is likely to be a period of stability in interest rates.”
Australia’s economy is struggling to transition away from resources-led growth following an unprecedented boom in mining investment that is expected to fall-off sharply over the next year.
The transition has seen the unemployment rate edge higher over the past year and the RBA has kept rates unchanged as it waits for signs of a recovery in the non-mining sectors.
The bank has been frustrated by the recent strength of the Australia dollar, but toned down its comments in Tuesday’s statement after the currency hit a four-year-low of 86.43 US cents in New York Friday.
Stevens said: “The exchange rate has declined recently, in large part reflecting the strengthening US dollar, but remains high by historical standards, particularly given the further declines in key commodity prices in recent months.
“It is offering less assistance than would normally be expected in achieving balanced growth in the economy.”
The “aussie” was broadly unchanged following the release of the RBA’s statement, buying 87.50 US cents. However, it is well down from the levels above 93 US cents when the RBA board last met on September 2.
The central bank also highlighted the pick-up in investor lending in the housing sector, which has been a source of concern as the residential property market booms thanks to the low interest rate environment.