In it’s first meeting of 2011, the Reserve Bank of Australia (RBA) has kept its official cash rate on hold at 4.75%.
The Reserve Bank Governor, Glenn Stevens, stated that even though Australia’s term of trade are at their highest levels since the early 1950′s; national income is growing strongly; private investment is picking up and commodity prices are likely to remain elevated in the near term. It is in stark contrast to the household sector, where thus far, there continues to be caution in spending and borrowing, and an increase in saving rate.
The RBA does not expect the recent floods in Queensland and Victoria to have too much an effect on the medium term outlook for inflation and thus expects inflation to remain within the 2% – 3% target range over the year ahead.
Whilst there is a hint of uncertainty in relation to the subsequent recovery of both Queensland and Victoria and its impact on inflation, the statement does suggest that there is no urgency in the near term for the RBA to do anything with rates.
Borrowers at this point in time can rest easy for a little while longer.
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