CANBERA (Alliance News) - Members of the Reserve Bank of Australia's monetary policy board said that the central bank's present stance is appropriate, minutes from the bank's July meeting revealed on Tuesday.
The members are comfortable with the benchmark lending rate where it is, although they did not absolutely rule out another rate cut - instead calling the prospect data dependent.
"Information to be received over the period ahead on economic and financial conditions would continue to inform the Board's assessment of the outlook and hence whether the current stance of policy remained appropriate to foster sustainable growth and inflation consistent with the target," the minutes said.
At the meeting, the RBA maintained its key interest rate at the record low 2.00% for the second straight month. The bank had lowered the rates by 25 basis points each in February and May. Policymakers observed that the Australian dollar has declined noticeably against a rising US dollar over the past year. Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.
"Commodity prices had fallen further and the Australian dollar had depreciated over the past month. Although the exchange rate against the US dollar was close to levels last seen in 2009, the decline in the Australian dollar had been more modest in terms of a basket of currencies," the bank said.
According to the RBA, the economy is likely to be operating with a degree of spare capacity for some time yet. With very slow growth in labor costs, inflation is expected to remain consistent with the target over the next one to two years, even with a lower exchange rate. Despite fluctuations in markets associated with the respective developments in China and Greece, long-term borrowing rates for most sovereigns and credit worthy private borrowers remain remarkably low, the RBA noted.
"In light of current and prospective economic circumstances and financial conditions, the board judged that leaving the cash rate unchanged was appropriate," the bank said.
Copyright RTT News/dpa-AFX