RBA leaves rates at 4.75% in July

The Reserve Bank board has, as expected, kept interest rates on hold at 4.75% in July.

Slower employment growth, sluggish household credit growth and inflation running at the bottom half of the target range were listed as reasons for keeping rates on hold for the seventh-straight meeting.

The Australian dollar eased slightly against the US dollar following the announcement – a sign the market now anticipates the next rate rise is now further off.

At 2.35pm the dollar was trading at $1.067 to the US dollar, compared with $1.07 prior to the announcement.

“Growth in employment has moderated over recent months and the unemployment rate has been little changed, near 5%,” said RBA governor Glenn Stevens in a statement following the announcement.

“Most leading indicators suggest that this slower pace of employment growth is likely to continue in the near term. Reports of skills shortages remain confined, at this point, to the resources and related sectors.

“After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn.

“Credit growth remains modest. Signs have continued to emerge of some greater willingness to lend and business credit has expanded this year after a period of contraction. Growth in credit to households, on the other hand, has slowed. Most asset prices, including housing prices, have also softened over recent months.

“Year-ended CPI inflation is likely to remain elevated in the near term due to the extreme weather events earlier in the year. However, as the temporary price shocks dissipate, CPI inflation is expected to be close to target over the next 12 months. In underlying terms, inflation has been in the bottom half of the target range, though a gradual increase is expected over time.”

Mr Stevens notes that while the global economy is continuing to expand, the pace of growth slowed in the June quarter.