THE Reserve Bank has decided to keep interest rates unchanged this afternoon, despite the majority of economists expecting a cut.
The cash rate was held at 3.25 per cent, the level it moved to when rates were cut by 25 basis points last month.
In a statement, governor Glenn Stevens said a rise in inflation during the September quarter was one of the factors in today’s decision.
“The introduction of the carbon price affected consumer prices in the September quarter, and there could be some further small effects over the next couple of quarters,” Stevens said.
“With prices data slightly higher than expected and recent information on the world economy slightly more positive, the board judged that the stance of monetary policy was appropriate for the time being.”
Stevens said growth is growing close to trend and interest rates have declined to below medium-term averages.
“While the impact of these changes takes some time to work through the economy, there are signs of easier conditions starting to have some of the expected effects,” he said.
“Business demand for external funding has increased this year, the housing market has strengthened and share prices have risen in line with markets overseas.”
Stevens also noted the exchange rate remains higher than expected, given the weaker global outlook.
The peak in resource investment is expected to occur next year, and that as this approaches, the board will be monitoring the industry’s strength.
CFMEU National Secretary Michael O’Connor said the Reserve Bank’s decision was “completely baffling”.
“Huge swathes of the economy are desperate for the relief,” he said.
“Manufacturing is under enormous pressure due to the high dollar, and Autodom’s recent difficulties should have served as a giant reminder.
“A rate cut today would have undoubtedly assisted the manufacturing sector to hold on to Australian employees.”