RBA leaves cash rate on hold at 2.5%

Central bank keeps official cash rate steady as widely expected, repeats view that period of stable rates is appropriate.

The Reserve Bank of Australia has left the official cash rate on hold, as widely expected, and reaffirmed its neutral bias.

At its April meeting, the central bank left the rate at a record low 2.5%, where it has been since the most recent cut in August last year.

The bank's board said a fall in the exchange rate from its highs a year ago will help in achieving balanced growth in the economy, "but less so than previously as a result of the rise over the past few months".

The exchange rate remains high by historical standards, the bank said.

The RBA also noted dwelling prices have increased significantly over the past year.

The board said recent information foreshadows a solid expansion in housing construction, while indicators of business conditions and confidence are rising.

"But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans," the board said, adding that public spending is scheduled to be subdued.

The central bank said monetary policy was appropriately configured and said it should help growth to strengthen over time.

Interest rates are very low and savers continue to look for higher returns, while credit growth is slowly picking up, the Reserve Bank said.

The rate of unemployment will likely rise a little further in the near term and wage growth has declined noticeably, according to the central bank.

"If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate," the board said in its statement.

The RBA said the United States economy continues to expand, the euro area has begun a fragile recovery from recession, Japan has recorded a significant pick-up in growth and China's growth remains in line with policymakers' objectives but may have slowed a little early this year.

Conditions are considerably more challenging than a year ago in some emerging market countries, while commodity prices have declined from their peaks but remain high in historical terms, the RBA said.

The RBA pulled back from its easing bias in February, saying the most prudent course was likely a period of stability in interest rates.

An AAP survey of 13 market economists forecast no movement in the cash rate for the first half of 2014.

The central bank last week again warned banks not to relax lending standards as house prices rise on the back of monetary easing.

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