At its meeting yesterday, 7th February, the Board decided to leave the cash rate unchanged at 1.50 per cent.
Conditions in the global economy have improved over recent months. Business and consumer confidence have both picked up. Above-trend growth is expected in a number of advanced economies, although uncertainties remain. In China, growth was stronger over the second half of 2016, supported by higher spending on infrastructure and property construction. This composition of growth and the rapid increase in borrowing mean that the medium-term risks to Chinese growth remain. The improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia’s national income.
Headline inflation rates have moved higher in most countries, partly reflecting the higher commodity prices. Long-term bond yields have also moved higher, although in a historical context they remain low. Interest rates have increased in the United States and there is no longer an expectation of further monetary easing in other major economies. Financial markets have been functioning effectively and stock markets have mostly risen.
In Australia, the economy is continuing its transition following the end of the mining investment boom. GDP was weaker than expected in the September quarter, largely reflecting temporary factors. A return to reasonable growth is expected in the December quarter.
For the complete statement of the interest rate decision, visit this link for the media release of the Reserve Bank of Australia.