"While further reductions may be required, on the information currently to hand it was appropriate to hold rates steady"
- Reserve Bank of Australia
Australian economy is responding to low interest rates and already starts showing signs of stabilisation, the Reserve Bank of Australia said Tuesday. However, the bank left the door open for another rate cut in case additional boost will be needed. Earlier this month, the RBA kept its benchmark cash rate target at 3% for the second month in a row after lowering interest rates six times since November 2011. A significant pick-up in retail sales as well as overall improvement of property market are both signalling that consumers are more confident about the economy and are showing willingness to increase spending. Moreover, Australian banks are reporting strong profit growth over the year due to improvements in the global economy and are benefiting from more favourable wholesale funding conditions.
"While further reductions may be required, on the information currently to hand it was appropriate to hold rates steady," the Reserve Bank of Australia said in the minutes of its March 5 policy meeting, published today.
"We continue to get a sense that the RBA remains in wait and see mode," said Alvin Pontoh, an Asia-Pacific strategist at TD Securities Inc. in Singapore. "There is some chance that the bank's easing bias is softened at the next communique."
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