Statement by Glenn Stevens, Governor: Monetary Policy Decision - November 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-11-04

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
4 November 2014
At its meeting today, the Board decided to leave the cash rate unchanged at
2.5 per cent
Growth in the global economy is continuing at a moderate pace. China's growth
has generally been in line with policymakers' objectives, though weakening
property markets there present a challenge in the near term. Commodity prices
in historical terms remain high, but some of those important to Australia
have declined further in recent months.
Volatility in some financial markets has picked up over the past couple of months.
Overall, however, financial conditions remain very accommodative. Long-term
interest rates and risk spreads remain very low. Markets still appear to
be attaching a low probability to any rise in global interest rates or other
adverse event over the period ahead.
In Australia, most data are consistent with moderate growth in the economy. Resources
sector investment spending is starting to decline significantly, while some
other areas of private demand are seeing expansion, at varying rates. Public
spending is scheduled to be subdued. Overall, the Bank still expects growth
to be a little below trend for the next several quarters.
Recent data on prices confirmed that inflation is running between 2 and 3 per cent,
as expected, and this is likely to continue. Although some forward indicators
of employment have been firming this year, the labour market has a degree
of spare capacity and it will probably be some time yet before unemployment
declines consistently. Hence, growth in wages is expected to remain relatively
modest over the period ahead, which should keep inflation consistent with
the target even with lower levels of the exchange rate.
Monetary policy remains accommodative. Interest rates are very low and have continued
to edge lower over the past year or so as competition to lend has increased.
Investors continue to look for higher returns in response to low rates on
safe instruments. Credit growth is moderate overall, but with a further pick-up
in recent months in lending to investors in housing assets. Dwelling prices
have continued to rise.
The exchange rate has traded at lower levels recently, in large part reflecting the
strengthening US dollar. But the Australian dollar remains above most estimates
of its fundamental value, particularly given the further declines in key
commodity prices in recent months. It is offering less assistance than would
normally be expected in achieving balanced growth in the economy.
Looking ahead, continued accommodative monetary policy should provide support to
demand and help growth to strengthen over time. Inflation is expected to
be 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.
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