RBA Signals it will Keep Interest Rates Steady

Australia’s central bank signaled it will keep interest rates low for some time as inflation is contained and the economy adjusts to fewer resource projects.

“Overall growth in coming quarters was likely to be below trend given expected slower growth in exports, the decline in mining investment and the planned fiscal consolidation,” the Reserve Bank of Australia said in minutes released today of its May 6 meeting, where it kept the cash rate unchanged at 2.5 percent. “The current accommodative stance of policy was likely to be appropriate for some time yet.”

Governor Glenn Stevens has held borrowing costs as the government prepared a fiscal tightening that’s set to drag on growth. Markets and most economists predict he’ll keep policy steady for the rest of this year to prevent a growth gap as mining companies scale back development. Low borrowing costs are driving up home prices, underscoring why the RBA may be reluctant to add to 2.25 percentage points of rate cuts since late 2011.

Bloomberg

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