Statement by Glenn Stevens, Governor: Monetary Policy Decision - October 2014 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2014-10-07

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
7 October 2014
At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per
Growth in the global economy is continuing at a moderate pace. China's growth
has generally been in line with policymakers' objectives, though some
data suggest a slowing in recent months. 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 in recent weeks. 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.
Labour market data have been unusually volatile of late. The Bank's assessment
remains that 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. Growth in wages
has declined noticeably and 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 recent months 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 over recent months.
The exchange rate has declined recently, in large part reflecting the strengthening
US dollar, but remains high by historical standards, 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.
Media Office
Information Department