Statement by Glenn Stevens, Governor: Monetary Policy Decision - March 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-03-01

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
1 March 2016
At its meeting today, the Board decided to leave the
cash rate unchanged at 2.0 per cent.
Recent information suggests that the global economy
is continuing to grow, though at a slightly lower pace
than earlier expected. While several advanced economies
have recorded improved growth over the past year, conditions
have become more difficult for a number of emerging
market economies. China's growth rate has continued
to moderate.
Commodity prices have declined very substantially over
the past couple of years. This partly reflects slower
growth in demand but also, in some key instances, large
increases in supply. The decline in Australia's
terms of trade has continued.
Financial markets have once again exhibited heightened
volatility over recent months, as participants grapple
with uncertainty about the global economic outlook and
policy settings among the major jurisdictions. Appetite
for risk has diminished somewhat and funding conditions
for emerging market sovereigns and lesser-rated corporates
have tightened. But funding costs for high-quality borrowers
remain very low and, globally, monetary policy remains
remarkably accommodative.
In Australia, the available information suggests that
the expansion in the non-mining parts of the economy
strengthened during 2015 despite the contraction in
spending in mining investment. This was reflected in
improved labour market conditions. The pace of lending
to businesses also picked up.
Inflation is quite low. With growth in labour costs
continuing to be quite subdued as well, and inflation
restrained elsewhere in the world, inflation is likely
to remain low over the next year or two.
Given these conditions, it is appropriate for monetary
policy to be accommodative. Low interest rates are supporting
demand, while supervisory measures are working to emphasise
prudent lending standards and so to contain risks in
the housing market. Credit growth to households continues
at a moderate pace, albeit with a changed composition
between investors and owner-occupiers. The pace of growth
in dwelling prices has moderated in Melbourne and Sydney
and has remained mostly subdued in other cities. The
exchange rate has been adjusting to the evolving economic
At today's meeting, the Board judged that there
were reasonable prospects for continued growth in the
economy, with inflation close to target. The Board therefore
decided that the current setting of monetary policy
remained appropriate.
Over the period ahead, new information should allow
the Board to judge whether the improvement in labour
market conditions is continuing and whether the recent
financial turbulence portends weaker global and domestic
demand. Continued low inflation would provide scope
for easier policy, should that be appropriate to lend
support to demand.