Statement by Glenn Stevens, Governor: Monetary Policy Decision - February 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-02-04

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
4 February 2014
At its meeting today, the Board decided to leave the cash rate unchanged at
2.5 per cent.
Since the Board's previous meeting, information on the global economy
has been consistent with growth having been a bit below trend in 2013, but
with reasonable prospects of a pick-up this year. The United States economy
continues its expansion and the euro area has begun a recovery from recession,
albeit a fragile one. Japan has recorded a significant pick-up in growth,
while China's growth remains in line with policymakers' objectives.
Commodity prices have declined from their peaks but in historical terms remain
The Federal Reserve has begun the process of curtailing stimulus measures
but financial conditions overall remain very accommodative. Long-term interest
rates and most risk spreads remain low. Equity and credit markets remain
able to provide adequate funding, but for some emerging market countries
conditions are considerably more challenging than they were a year ago.
In Australia, information becoming available over the summer suggests slightly
firmer consumer demand and foreshadows a solid expansion in housing construction.
Some indicators of business conditions and confidence have shown improvement.
At the same time, with resources sector investment spending set to decline
significantly, considerable structural change occurring and lingering uncertainty
in some areas of the business community, near-term prospects for business
investment remain subdued. The demand for labour has remained weak and, as
a result, the rate of unemployment has continued to edge higher. Growth in
wages has declined noticeably.
Inflation in the December quarter was higher than expected. This may be explained
in part by faster than anticipated pass-through of the lower exchange rate,
though domestic prices also continued to rise at a solid pace, despite slower
growth in labour costs. If domestic costs remain contained, some moderation
in the growth of prices for non-traded goods could be expected over time.
Monetary policy remains accommodative. Interest rates are very low and savers
continue to look for higher returns in response to low rates on safe instruments.
Credit growth remains low overall but is picking up gradually for households.
Dwelling prices have increased further over the past several months. The
exchange rate has declined further, which, if sustained, will assist in achieving
balanced growth in the economy.
Looking ahead, the Bank expects growth to remain below trend for a time yet
and unemployment to rise further before it peaks. Beyond the short term,
growth is expected to strengthen, helped by continued low interest rates
and the lower exchange rate. Inflation is expected to be somewhat higher
than forecast three months ago, but still consistent with the 2–3 per cent
target over the next two years.
In the Board's judgement, monetary policy is appropriately configured
to foster sustainable growth in demand and inflation outcomes consistent
with the target. On present indications, the most prudent course is likely
to be a period of stability in interest rates.
Dr Christopher Kent
Assistant Governor (Economic)
Phone: +61 2 9551 8800
Dr Guy Debelle
Assistant Governor (Financial Markets)
Phone: +61 2 9551 8200
Media Office
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