RBA keeps interest rate unchanged at 3.5%

The Reserve Bank has decided to keep the official interest rate unchanged at 3.5% at its monthly meeting this afternoon, a move largely expected by economists.

In a statement, Reserve Bank governor Glenn Stevens said that growth in the world economy has softened and noted that commodity prices – which are “of importance” to the Australian economy – have softened.

But he also noted most indicators suggest growth has been running close to trend.

“Consumption growth was also quite firm in the first half of the year, though some of that strength was temporary.”

“Labour market data have shown moderate employment growth, even with job shedding in some industries, and the rate of unemployment has thus far remained low.”

It noted inflation is still low with underlying measures near 2% at the year to June. The RBA said it expectations inflation will be consistent with the target over the next one to two years.

The bank also said the impact of earlier interest rate cuts is still becoming known, but noted that dwelling prices have firmed.

“The exchange rate has declined over the past month or two, though it has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.”

While the RBA noted that even despite a “more subdued international outlook than was the case a few months ago”, the current monetary policy remained appropriate.