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RESERVE BANK PUTS INTEREST RATES ON HOLD AMID GLOBAL VOLATILITY...
THE Reserve Bank of Australia left interest rates on hold at 4.75 per cent Tuesday, as volatility continued to plague world financial markets.
Tuesday's decision at a board meeting held in Perth was widely expected by economists, who have predicted the RBA will keep rates on hold for the rest of the year.
The increased volatility in financial markets and concerns about Europe and the US are expected to keep the RBA from raising rates again soon. The central bank has not increased rates since its November hike.
In an accompanying statement, RBA governor Glenn Stevens maintained his hard line on inflation, reminding Australians that underlying measures have been increasing this year.
"While they have, to date, remained consistent with the 2-3 per cent target on a year-ended basis, the board remains concerned about the medium-term outlook for inflation." Mr Stevens wrote.
"A key question will be the extent to which softer global and domestic growth will work, in due course, to contain inflation."
He said the RBA's board judged it was prudent to keep rates unchanged.
"In future meetings, the board will continue to assess carefully the evolving outlook for growth and inflation," Mr Stevens said.
There is growing evidence that the Australian economy has bounced back sharply after having contracted in the first quarter of 2011 because of the Queensland floods.
The national accounts to be published tomorrow are expected to show the economy grew by 1 per cent to 1.2 per cent in the three months to June, driven mostly by the high point in terms of trade and the mining boom.
The current account figures published today showed the deficit fell from $11.1 billion to $7.4bn.
Moody's Analytics associate economist Katrina Ell said today mining and recovering exports would have helped steer the economic turnaround in the second quarter.
"Mining and agriculture output and exports have been on the mend since January's floods, and drove the strong second-quarter recovery," Ms Ell said.
"A surge in business investment to support the mining boom also provided a boost to second-quarter growth.
"The strong capital investment plans suggest mining will continue to drive the robust economic growth ahead."
Source theaustralian.com.au
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