Statement by Glenn Stevens, Governor: Monetary Policy Decision - May 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-05-03

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
3 May 2016
At its meeting today, the Board decided to lower the
cash rate by 25 basis points to 1.75 per cent, effective
4 May 2016. This follows information showing inflationary
pressures are lower than expected.
The global economy is continuing to grow, though at
a slightly lower pace than earlier expected, with forecasts
having been revised down a little further recently.
While several advanced economies have recorded improved
conditions over the past year, conditions have become
more difficult for a number of emerging market economies.
China's growth rate moderated further in the first
part of the year, though recent actions by Chinese policymakers
are supporting the near-term outlook.
Commodity prices have firmed noticeably from recent
lows, but this follows very substantial declines over
the past couple of years. Australia's terms of
trade remain much lower than they had been in recent
Sentiment in financial markets has improved, after a
period of heightened volatility early in the year. However,
uncertainty about the global economic outlook and policy
settings among the major jurisdictions continues. Funding
costs for high-quality borrowers remain very low and,
globally, monetary policy remains remarkably accommodative.
In Australia, the available information suggests that
the economy is continuing to rebalance following the
mining investment boom. GDP growth picked up over 2015,
particularly in the second half of the year, and the
labour market improved. Indications are that growth
is continuing in 2016, though probably at a more moderate
pace. Labour market indicators have been more mixed
Inflation has been quite low for some time and recent
data were unexpectedly low. While the quarterly data
contain some temporary factors, these results, together
with ongoing very subdued growth in labour costs and
very low cost pressures elsewhere in the world, point
to a lower outlook for inflation than previously forecast.
Monetary policy has been accommodative for quite some
time. Low interest rates have been supporting demand
and the lower exchange rate overall has helped the traded
sector. Credit growth to households continues at a moderate
pace, while that to businesses has picked up over the
past year or so. These factors are all assisting the
economy to make the necessary economic adjustments,
though an appreciating exchange rate could complicate
In reaching today's decision, the Board took careful
note of developments in the housing market, where indications
are that the effects of supervisory measures are strengthening
lending standards and that price pressures have tended
to abate. At present, the potential risks of lower interest
rates in this area are less than they were a year ago.
Taking all these considerations into account, the Board
judged that prospects for sustainable growth in the
economy, with inflation returning to target over time,
would be improved by easing monetary policy at this