Few were surprised this week that the Reserve Bank of Australia opted to leave the official cash rate (OCR) unchanged at 2.5 per cent for the month of September.
After cutting the OCR by 25 basis points last month to its lowest level since 1960, the Bank has adopted a wait-and-see position, while it assesses the effects of this last in a series of cuts which have seen official rates drop by 225 basis points since November 2011.
“The easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values, and further effects can be expected over time, including from the declines in rates seen over recent months”, Reserve Bank Governor Glenn Stevens announced in a statement.
“The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households.”
Governor Stevens noted that the Australian dollar has depreciated by around 15 per cent since early April, although it remains at a high level.
“It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy”, he said.
He concluded that the Board will ‘continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target’.