RBA Leaves Key Interest Rate Unchanged

(RTTNews) - The Reserve Bank of Australia, or RBA, on Tuesday decided to leave its benchmark cash rate unchanged at 4.75 percent for a ninth consecutive meeting, amid uncertain global economic outlook.

The central bank said that the outlook for the global economy is less clear than it was earlier in the year and a number of forecasters have scaled back their global growth estimates over the past couple of months.

At this stage, little evidence is available to gauge any effects of the European and US problems on other regions, the policy board said.

Except for Australia's high terms of trade, strong growth in national income and robust expansion of investment in the resources sector, other sectors are facing challenges from cautious behavior of households and the high level of the exchange rate.

Central bank governor Glenn Stevens said the near-term growth outlook continues to look somewhat weaker than was expected a few months ago. Beyond the near term, growth is still likely to be at trend or higher, unless the world economic outlook continues to deteriorate, he added.

In its quarterly statement on monetary policy released last month, the Reserve Bank of Australia lowered its growth forecast for 2011, amid weak consumption and slower-than-expected recovery of the Queensland coal industry. The gross domestic product is now expected to grow 2 percent in 2011 and 4.5 percent in 2012.

Stevens said that the Board also remained concerned about the medium-term outlook for inflation, though the rate, so far, remained consistent with the 2-3 percent target. "A key question will be the extent to which softer global and domestic growth will work, in due course, to contain inflation," he said.

The policy board judged that it was prudent to maintain the current stance of monetary policy. The bank will continue to carefully assess the evolving outlook for growth and inflation, the board said.

Year-ended inflation should start to decline towards the end of the year, as temporary weather-related effects reverse. But measures of underlying inflation have been increasing this year, after declining for the previous two years, the bank observed.

RBA expects consumer prices to rise 3.5 percent in the year ended December quarter of 2011, faster than the earlier prediction of 3.25 percent. The core inflation will accelerate to 3.25 percent from 3 percent, the bank said in its quarterly report.

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