RESERVE BANK LEAVES RATES ON HOLD

An excerpt of RBA Governor Glenn Stevens comments follows:
Despite improvements in the global financial markets, Stevens said: "Credit conditions nonetheless remain difficult in the major countries as banks continue to face loan losses associated with the period of economic weakness. Concerns regarding some sovereigns have increased," he said.

Stevens noted that economic conditions in Australia have been stronger than expected, adding that the country has experienced lower than expected unemployment, modest inflation and expanding credit for housing.

"With the risk of serious economic contraction in Australia having passed, the board had moved at recent meetings to lessen the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the board judged it appropriate to hold a steady setting of monetary policy for the time being."

However Stevens foreshadowed future rate rises, noting that rates currently remain lower than average.

"If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term," he said.