Interest Rates still on hold

Australian consumers continue to dodge an interest rate hike as, in line with predictions, the Reserve Bank of Australia kept the cash rate steady at 4.5% this month. But why?

In its meeting minutes released late yesterday, the RBA reported the major news in the domestic economy had been that underlying inflation had continued to fall and was now below three per cent. Were it not for the effect of the rise in tobacco excise earlier in the year, CPI inflation would have remained below 3 per cent, the report said.

The RBA detailed how employment had continued to grow solidly but consumer spending remained subdued, even though confidence was high.

Further saying that credit growth remained soft and the housing market had stabilised after the surge in prices late last year and earlier this year. Indicators of business investment remained strong. The staff forecast continued.

Developments over the latest months had not materially changed the board's assessment. The inflation data released during the month in line with the board's expectations for a decline, and the outlook for economic growth had not changed.

The RBA added markets had settled somewhat, but there was still more uncertainty over the global outlook than there had been earlier in the year.

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