Australia holds rate, world economy slightly more positive

    Australia's central bank kept its benchmark cash rate unchanged at 3.25 percent, defying expectations for a rate cut, and said the impact of previous rate cuts would continue to stimulate activity for some time and the outlook for the global economy was looking a bit more positive.
    The Reserve Bank of Australia (RBA), which has cut rates by 100 basis points this year, also said inflation was "slightly higher than expected" though still consistent with the bank's medium-term target of 2 to 3 percent.
    "With prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being," the RBA said in statement, quoting its governor, Glenn Stevens.
    Consumer prices in Australia rose 1.4 percent in the three months that ended in September from the June quarter, for a rise of 2.0 percent through the year, up from a rise of 1.2 percent through the year to the end of the June quarter.
    Referring to this year's rate cuts, the most recent in October and September, the RBA said interest rates for borrowers were now below their medium-term average, savers were facing increased incentives to look for assets with higher returns, business demand for external funding had risen, the housing market had strengthened and share prices had risen.

    "Further effects of actions already taken to ease monetary policy can be expected over time," the RBA said, adding that the exchange rate remains higher than expected, given lower export prices and the weaker global outlook.
    Australia's Gross Domestic Product expanded by an annual 3.7 pct in the second quarter, down from 4.3 percent in the first quarter.
    A return to "very strong growth in consumption is unlikely" though there are signs of ongoing growth, the RBA said, adding that overall economic growth had been running close to trend in the past year,  helped by large increases in capital spending in the resource sector. However, the investment in resources is expected to peak next year, at a lower level than expected six months ago.
   The RBA said global economic growth is forecast to be a little below average for a time and risks to the outlook remain to the downside, mainly due to Europe where economic activity is still contracting.
    "Risks elsewhere seem more balanced," the RBA said, noting the U.S. was growing moderately while "recent data from China suggest growth there has stabilized."

    www.CentralBankNews.info