Statement by Glenn Stevens, Governor: Monetary Policy Decision - February 2016 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2016-02-02

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
2 February 2016
At its meeting today, the Board decided to leave the
cash rate unchanged at 2.0 per cent.
Recent information suggests 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
Commodity prices have declined further, especially oil
prices. This partly reflects slower growth in demand
but also very substantial increases in supply over recent
years. The decline in Australia's terms of trade,
which began more than four years ago, has therefore
continued.
Financial markets have once again exhibited heightened
volatility recently, as participants grapple with uncertainty
about the global economic outlook and diverging 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 even as the contraction in
spending in mining investment continued. Surveys of
business conditions moved to above average levels, employment
growth picked up and the unemployment rate declined
in the second half of the year, even though measured
GDP growth was below average. The pace of lending to
businesses also picked up.
Inflation continues to be quite low, with the CPI rising
by 1.7 per cent over 2015. This was partly caused by
declining prices for oil and some utilities, but underlying
measures of inflation are also low at about 2 per cent.
With growth in labour costs continuing to be quite subdued
as well, and inflation restrained elsewhere in the world,
consumer price 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 regulatory 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
over recent months and has remained mostly subdued in
other cities. The exchange rate has continued its adjustment
to the evolving economic outlook.
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 recent improvement in
labour market conditions is continuing and whether the
recent financial turbulence portends weaker global and
domestic demand. Continued low inflation may provide
scope for easier policy, should that be appropriate
to lend support to demand.