“Australia’s central bank held its benchmark interest rate at the half-century low reached in 2009 and said it has room to cut to a record as a weak labor market contains inflation. Bond yields and the local currency fell.
“The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand,” Governor Glenn Stevens said in a statement today in Sydney after leaving the overnight cash-rate target at 3 percent. “Looking ahead, with the labor market softening somewhat and unemployment edging higher, conditions are working to contain pressure on labor costs.”
The nation’s currency weakened as Stevens’s statement indicated a willingness to underpin growth and repeated concern about the local dollar’s sustained strength. TheReserve Bank of Australia chief said the economy will likely expand “a little below trend” in the coming year, a lessoptimistic view than the one he released two months ago.
“We expected that recent optimism around the world economy would not be sufficient to change the bank’s clear bias to further cut rates,” said Bill Evans, chief economist at Westpac Banking Corp. (WBC) in Sydney. “There was considerable encouragement in the statement for our near-term view that they will decide to cut rates by 25 basis points at the next meeting.”
Today’s decision to pause was predicted by 24 of 28 economists surveyed by Bloomberg, with the rest forecasting a 0.25 percentage point cut.
