The Reserve Bank, at it’s meeting today, elected to keep rates on hold at 4.75% for the tenth straight month. The main reason cited by RBA Governor Glenn Stevens is significant signs of weakness in the global economy and volatility in global markets.
The statement from the RBA went on further to say that while it remained concerned about the medium term inflation outlook, it expects year end CPI inflation to start to decline towards the end of the year, as temporary weather related effects reverse. These being the QLD floods and cyclones.
Interestingly the statement also further acknowledged that despite the continued boom in the resources sector the rest of the economy is doing it tough.
I believe this is a further acknowledgement by the RBA that any increases to interest rates will be a devastating blow to the domestic economy, outside of the resource sector and will likely mean at the very least rates will remain static in the near term. If domestic and global growth soften further it could very well lead to a reduction in interest rates.
Mark Lewis is the Executive Chairman of Bernie Lewis
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