Statement by Glenn Stevens, Governor: Monetary Policy Decision - July 2012 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2012-07-03

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
3 July 2012
At its meeting today, the Board decided to leave the cash rate unchanged at 3.50
Growth in the world economy picked up in the early months of 2012, having slowed
in the second half of 2011. But more recent indicators continue to suggest
weakening in Europe and a slower pace of growth in China. Conditions in other
parts of Asia have recovered from the effects of last year's natural
disasters, but the ongoing trend is unclear and could be dampened by the
effects of slower growth outside the region. The United States continues
to grow at a modest pace. Commodity prices have declined, which is helping
to reduce inflation and providing scope for some countries to ease macroeconomic
policies. Australia's terms of trade have peaked, though they remain
historically high.
Financial markets have initially responded positively to signs of further progress
towards longer-term sustainability in European financial affairs, but Europe
will remain a potential source of adverse shocks for some time. While capital
markets remain open to corporations and well-rated banks, low appetite for
risk has seen long-term interest rates faced by highly rated sovereigns,
including Australia, decline to exceptionally low levels. Share markets have
remained volatile.
In Australia, recent data suggest that the economy continued to grow in the first
part of 2012, at a pace somewhat stronger than had been earlier indicated.
Labour market conditions also firmed a little, notwithstanding job shedding
in some industries; the rate of unemployment remains low.
There have been no changes to the Bank's outlook for inflation. Over the coming
one to two years, and abstracting from the effects of the carbon price, inflation
is expected to be consistent with the target. Maintaining low inflation over
the longer term will, however, require growth in domestic costs to slow as
the effects of the earlier exchange rate appreciation wane.
Interest rates for borrowers have declined, to be a little below their medium-term
averages. Business credit has increased more strongly in recent months, though
credit growth remains modest overall. The housing market remains subdued.
The exchange rate has been volatile recently, but overall remains high.
As a result of the sequence of earlier decisions, there has been a material easing
in monetary policy over the past six months. At today's meeting, the
Board judged that, with inflation expected to be consistent with the target
and growth close to trend, but with a more subdued international outlook
than was the case a few months ago, the stance of monetary policy remained
appropriate.
Dr Christopher Kent
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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