Interest Rate




Feb. 7, 2014 – RBA’s Quarterly Statement on Monetary Policy (SoMP)

There are some increased inflation expectations. For example, the expectated inflation by June 2014 was revised to 3.25%, with underlying inflation at 3%. In the November report, the forecast was 2.75%, with underlying inflation at 2.5%. The expected range for inflation in 2014. is now 2.25% to 3.25%, whereas the range projected in November was 2% to 3%.

Another interest rate cut would be  hard to come by, even though growth is expected to be below trend as noted in the statement:

“With growth of economic activity expected to remain below trend for a few more quarters at least, it is likely that employment growth will be only moderate over the coming year and the unemployment rate will continue to edge higher. From around early 2015, stronger economic growth should underpin an increase in labour demand, with growth in employment increasing and the unemployment rate declining gradually.” – Excerpt from the RBA’s SoMP

Feb. 4, 2014 – As expected, Glenn Stevens and the RBA held the official cash rate at 2.50%. It did note that the recent slide in the Aussie could help, instead of noting its uncomfortably elevated level.

“Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased further over the past several months. The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.

Looking ahead, the Bank expects growth to remain below trend for a time yet and unemployment to rise further before it peaks. Beyond the short term, growth is expected to strengthen, helped by continued low interest rates and the lower exchange rate. Inflation is expected to be somewhat higher than forecast three months ago, but still consistent with the 2–3 per cent target over the next two years.” – Excerpt from the RBA statement

Dec. 3, 2013 – The RBA held the official cash rate at the historic low of 2.50%. Glenn Stevens has sounded more dovish, but has been reluctant in cutting the interest rate further.

“In Australia, the economy has been growing a bit below trend over the past year and the unemployment rate has edged higher. This is likely to persist in the near term, as the economy adjusts to lower levels of mining investment. Recent data on prices and wages show inflation consistent with the medium-term target. The Bank’s assessment is that this is likely to remain the case over the next one to two years.

The easing in monetary policy that has already occurred since late 2011 has supported interest-sensitive spending and asset values. The full effects of these decisions are still coming through, and will be for a while yet. The pace of borrowing has remained relatively subdued overall to date, though recently there have been signs of increased demand for finance by households. Housing and equity markets have strengthened further over recent months, trends which should in time be supportive of investment.

The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy.” – Excerpt from the RBA statement

Nov. 7, 2013  – In the Quarterly statement on monetary policy (pdf) the RBA cut  its 2014 growth forecast based on lower mining investment. The bank has not taken rate cut from the table


Learn about the Reserve Bank of Australia

Mandate: 3 main points:

1)      Price stability – maintain inflation target of 2-3% annually.

RBA Chief Glenn Stevens2)      Maintenance of full employment

3)      Economic prosperity and welfare of Aussies.


Key Members: Governor, deputy governor, secretary to the treasurer and 6 government-appointed members.

Governor:  Glenn Stevens

Deputy Governor: Philip Lowe