Interest rates settle in to period of stability


The Reserve Bank has followed through on its promise of stability, leaving interest rates unchanged this month at 2.5 per cent. 

The announcement comes a week before the Abbott Government releases its federal budget. 

That is the ninth month in a row that the RBA’s rate has remained steady. 

Most economists were expecting interest rates to stay the same, and the RBA has been reasonably upbeat about the economy, especially with regards to employment. 

Following the latest jobs report where unemployment did actually fall to 5.8 per cent, Glenn Stevens from the RBA said it would still probably be some time before unemployment declined consistently and would probably rise a little further in the short term. 

The statement perhaps suggests the RBA may be thinking that unemployment has peaked at 6.1 per cent and that inflation is also well contained in the current economy. 

“Growth in wages has declined noticeably and this has been reflected more clearly in the latest price data, which show a moderation in growth in prices for non-traded goods and services,” Mr Stevens said.

“As a result inflation is consistent with the target.” 

If price rises remain subdued and inflation is kept under control it suggests the period of stable interest rates may extend well into next year.


News & Resources