After the impressive performance of the economy in the first quarter, policymakers at the Reserve bank of Australia (RBA) seem to be in no rush to lower the interest rates.
One month after lowing interest rates to a historic low of 1.75%, the RBA remained on the sidelines in June, with policymakers remarking on the economy’s strong performance despite a massive decline in business investment that could complicate the future growth outlook.
According to the RBA’s statement last month, holding policy steady is consistent with their mandate of ensuring sustainable economic growth and supporting healthy inflation levels over time.
The Australian economy expanded 1.1% in the first quarter and 3.1% annually, the strongest pace of expansion in three years.
Deflationary risks compelled RBA to lower its cash rate by 25 basis points in May, as officials sought an aggressive approach to stimulate the economy.
Market analysis suggests that the risks posed by weak inflation are unlikely to subside in near term, which could prompt RBA to ease monetary policy further.
Under the guidance of Governor Glenn Stevens, the RBA has lowered interest rates from as high as 7.25% all the way down to the current rate of 1.75%. Mr. Stevens is set to step down as central bank chief in September, paving the way for successor and current Deputy Governor Philip Lowe to take the helm.