Statement by Glenn Stevens, Governor: Monetary Policy Decision - December 2010 | Media Releases | RBA
Central bank: rba | Type: statement | Date: 2010-12-07

Media Release
Statement by Glenn Stevens, Governor:
Monetary Policy Decision
7 December 2010
At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per
Since the previous Board meeting, concerns about the creditworthiness of a number
of European governments have again become the main focus of financial markets,
with a marked rise in sovereign bond spreads for some euro-area countries
and an increase in volatility. At the same time, recent data suggest that
the Chinese and Indian economies have continued to grow strongly and price
pressures, particularly for food, have picked up in China as well as a number
of other economies in Asia. Modest growth is continuing in the United States.
For Australia, the terms of trade are at their highest level since the early 1950s,
and national income is growing strongly as a result. Recent information indicates
that, as had been expected, private investment is beginning to pick up in
response to high levels of commodity prices. In the household sector thus
far, there continues to be a degree of caution in spending and borrowing,
which has led to a noticeable increase in the saving rate. Asset values have
generally been little changed over recent months and overall credit growth
remains quite subdued, notwithstanding evidence of some greater willingness
Employment growth has been very strong over the past year, though some leading indicators
suggest a more moderate pace of expansion in the period ahead. After the
significant decline last year, growth in wages has picked up somewhat, as
had been expected. Some further increase is likely over the coming year.
The exchange rate has risen significantly this year, reflecting the high level of
commodity prices and the respective outlooks for monetary policy in Australia
and the major countries. This will assist, at the margin, in containing pressure
on inflation over the period ahead. Over the next few quarters, inflation
is expected to be little changed, though it is likely to increase somewhat
over the medium term if the economy grows as expected.
Following the Board's decision last month to lift the cash rate, and the subsequent
increases by financial institutions, lending rates in the economy are now
a little above average. The Board views this setting of monetary policy as
appropriate for the economic outlook.
Dr Philip Lowe
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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