Statement by Glenn Stevens, Governor: Monetary Policy Decision - May 2015 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2015-05-05

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
5 May 2015
At its meeting today, the Board decided to lower the cash rate by 25 basis points
to 2.0 per cent, effective
6 May 2015.
The global economy is expanding at a moderate pace, but commodity prices have declined
over the past year, in some cases sharply. These trends appear largely to
reflect increased supply, including from Australia. Australia's terms
of trade are falling nonetheless.
The Federal Reserve is expected to start increasing its policy rate later this year,
but some other major central banks are stepping up the pace of unconventional
policy measures. Hence, financial conditions remain very accommodative globally,
with long-term borrowing rates for sovereigns and creditworthy private borrowers
remarkably low.
In Australia, the available information suggests improved trends in household demand
over the past six months and stronger growth in employment. Looking ahead,
the key drag on private demand is likely to be weakness in business capital
expenditure in both the mining and non-mining sectors over the coming year.
Public spending is also scheduled to be subdued. The economy is therefore
likely to be operating with a degree of spare capacity for some time yet.
Inflation is forecast to remain consistent with the target over the next
one to two years, even with a lower exchange rate.
Low interest rates are acting to support borrowing and spending, and credit is recording
moderate growth overall, with stronger lending to businesses of late. Growth
in lending to the housing market has been steady over recent months. Dwelling
prices continue to rise strongly in Sydney, though trends have been more
varied in a number of other cities. The Bank is working with other regulators
to assess and contain risks that may arise from the housing market. In other
asset markets, prices for equities and commercial property have been supported
by lower long-term interest rates.
The Australian dollar has declined noticeably against a rising US dollar over the
past year, though less so against a basket of currencies. Further depreciation
seems both likely and necessary, particularly given the significant declines
in key commodity prices.
At today's meeting, the Board judged that the inflation outlook provided the
opportunity for monetary policy to be eased further, so as to reinforce recent
encouraging trends in household demand.
Media Office
Information Department