THE CASH RATE REMAINS 4.75%.

At its meeting held today, the Reserve Bank of Australia (RBA) Board decided to maintain the official interest rate at 4.75%.
 Key Factors
 The following sentences taken from the RBA's media release provide the key reasons for today's decision:
 

·         The global economy is continuing its expansion, led by very strong growth in the Asian region.

·         Australia's terms of trade are at their highest level since the early 1950s and national income is growing strongly and Private investment is picking up, mainly in the resources sector, in response to high levels of commodity prices.

·         In the household sector thus far, in contrast, there continues to be caution in spending and borrowing, and a higher rate of saving out of current income.

·         Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend

·         The labour market firmed in 2010, with unusually strong growth in employment and a decline in the rate of unemployment and reports of skills shortages remain confined, at this point, to the resources and related sectors.

·         Inflation is consistent with the medium-term objective of monetary policy, having declined significantly from its peak in 2008 and production losses due to weather are temporarily raising prices for some agricultural produce, but these should fall back later in the year.

The chart shows the movement of the official interest rates over the past decade.

Commentary
 Overall the Board judged that the current mildly restrictive stance of monetary policy remained appropriate in view of the general macroeconomic outlook. This view is highly consistent with consensus view of market economists.
 Outlook
 In the February Interest Rate Knowledge Update, no interest rate increases were considered  likely over the next few months while by mid-year and into the first half of 2012 the economic landscape is expected to change.  At present this remains the view. In fact, the impacts of the  big wet and cyclone Yasi has reinforced this view to the point where the author of this piece is prepared to walk naked through Queens Street Mall if there is a rate rise announced in March. Let's hope for the benefit of all that there is no preemptive strike against inflation is announced in a month's time.