RBA holds interest rate at 2 per cent

July 7 (BusinessDesk) – The New Zealand dollar traded in a 20 basis point range in local trading as the Reserve Bank of Australia kept interest rates unchanged, and as markets continue to watch the fall-out from Greece’s vote against adopting harsh austerity measures to access bail-out funds.

“The RBA does not appear to be drawing any comfort yet from the lower Australian dollar, and we believe this is a reasonable assessment given the decline in commodity prices since it last cut the cash rate in early May”, he said.

In a statement mostly identical to the previous month, Reserve Bank governor Glenn Stevens said it was appropriate to leave interest rates unchanged.

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.

The local unit hardly moved on the RBA’s decision, with the currency buying 74.74 United States cents.

Australia’s number one trading partner, which is already facing a slowing economy, has taken steps in recent days to prop up the Chinese stock market after tumbling more than 25 per cent since mid-June.

The Reserve Bank of Australia has announced the result of its monthly board meeting amid a climate of rising house prices and sluggish growth.

The sharemarket reaction to today’s announcement was muted, while the Australian dollar traded in a tight range, jumping between US74.9c and US74.6c in the moments after the decision. In its statement, the bank said the economy has continued to grow over the past year, but at a rate somewhat below its longer-term average. The rate of unemployment, though elevated, has been little changed recently.

While no change happened today, Stevens didn’t rule out changes later in the year.

“In the absence of other sources of stimulus, this will mean the RBA will have to ease monetary policy further”.

“On the negative side, commodity prices have fallen further, the Greek debt crisis continues and Chinese authorities are attempting to manage a soft landing for the share market”. Indeed, Sydney’s property market remains somewhat inflated which the Bank confirmed it was still working with other regulators to assess. Just the usual “further depreciation seems both likely and necessary.”