Shock: RBA keeps interest rates on hold

<font color=red><b>BREAKING NEWS:</b></font> Reserve Bank leaves interest rates unchanged at 3.7 percent

February 2, 2010

The Reserve Bank has left interest rates unchanged at 3.7 percent, bucking consensus predictions of a fourth straight rise.

The RBA says the global economy is growing and world GDP is expected to rise at close to trend pace in 2010 and 2011, a stark contrast to predictions by economists throughout the country who said a rate rise was inevitable.

RBA Governor Glenn Stevens says economic conditions in Australia have been stronger than expected and an improving labour market is supporting household finances as well as a recovery in net worth.

"Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private-sector labour costs during 2009, the recent rise in the exchange rate and a period of slower growth in demand," he says.

"Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point.

"Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being".

But Stevens says the rate freeze is unlikely to continue for much longer as monetary policy will over time need to be adjusted to ensure inflation remains consistent with the target over the medium term.

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