Statement by Glenn Stevens, Governor: Monetary Policy Decision - October 2010 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2010-10-05

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
5 October 2010
At its meeting today, the Board decided to leave the cash rate unchanged at 4.5 per
The global economy grew faster than trend over the year to mid 2010, but will probably
ease back to about trend pace over the coming year. Recent information is
consistent with a more sustainable, but still strong, pace of growth in China
and most of the Asian region. In Europe and the United States, growth prospects
appear to be modest in the near term, a legacy of the financial crisis and
its impact on private and public finances. Financial markets are still characterised
by a degree of uncertainty, and are responding both to differences in growth
outlooks between regions and evident strains on public finances and banking
systems in several smaller countries in Europe. Most commodity prices have
changed little over recent months, and those most important to Australia
remain very high.
Information on the Australian economy shows growth around trend over the past year.
Public spending was prominent in driving aggregate demand for several quarters
but this impact is now lessening, while the prospects for private demand,
and in particular business investment, have been improving. This is to be
expected given the large rise in Australia's terms of trade, which
is now boosting national income very substantially.
Asset values are not moving notably in either direction, and overall credit growth
is quite subdued at this stage, notwithstanding evidence of some greater
willingness to lend. Inflation has moderated from the excessive pace of 2008.
The effects of the rise in tobacco taxes aside, CPI inflation has been running
at around 2¾ per cent over the past year. That looks likely to
continue in the near term.
The current stance of monetary policy is delivering interest rates to borrowers close
to their average of the past decade. The Board regards this as appropriate
for the time being. If economic conditions evolve as the Board currently
expects, it is likely that higher interest rates will be required, at some
point, to ensure that inflation remains consistent with the medium-term target.
Dr Philip Lowe
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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