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Rate hold likely to continue

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Interest rates appear likely to stay on hold for now with the Reserve Bank’s monetary policy meeting minutes for April highlighting Australia’s two-speed economy.

The minutes for the April 5 meeting, which saw the cash rate left on hold at 4.75 per cent, reveal the central bank’s acknowledgement of diverging forces present in both the domestic and international economy.

“Consumer sentiment had declined recently to be only modestly above long-run average levels,” the board noted, while “recent business indicators showed a somewhat mixed picture”.

The extreme weather events across Queensland were also considered with the Reserve Bank noting the complication they had caused in terms of interpreting economic data as well as the impact they had on production.

“While domestic demand appeared to be expanding at a solid pace, production in the quarter had been significantly affected by the natural disasters,” the board noted.

“Given the outlook for the economy, and in particular the high level of the terms of trade and the prospective further large increase in investment, members considered that this stance remained appropriate so as to ensure that the medium-term inflation outlook remained consistent with the target,” the board concluded.

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