The Reserve Bank of Australia decided today to keep interest rates at 3.00%, the lowest in 49 years, for the fourth consecutive month. The Reserve Bank governor Mr. Stevens said that fears of severe contraction in the economy has "abated" amid stabilizing economic conditions around the globe.
Mr. Stevens said in his statement that the world economy started to show clear signs of stability, thanks for the global stimulus plans set by governments around the world that led to an improving outlook for the world economy. He added that the U.S economy reached a turning point, while the economy in the euro zone is still weak.
As for China, it showed strong growth rates during the last few months that was one of the pillars that supported the Australian economy to face weak world demand after the financial crisis being the worst since the postwar period.
However, Mr. Stevens mentioned that confidence in financial markets around the world continued to improve, despite obstacles found in credit markets, and that economic weakness on asset quality is representing the real challenge for the economy. He also signaled that economic conditions appear to be stronger than forecasts during the last months, especially with resilience in consumer spending and in exports, which is supporting consumer confidence and the business sector. As a consequence, fears from deteriorating economic conditions in the economy reduced.
There are concerns about weak industrial output, besides declining consumer spending and investments during the upcoming period, but Stevens said that the economy will be supported by domestic spending and the improving housing sector that will make us witness economic expansion in 2010.
As for inflation, Stevens said that it is moderating after it was affected by declining energy and primary goods prices in addition to the slowing economy and weak demand. He expected that moderating inflation will last during this year along with an increasing currency value which is leading to a moderating inflation rate.
Mr. Stevens described the housing and credit markets as solid, as he referred to the incline in house prices in the last months. Companies postponed investing plans as it is seeking tighter credit criteria in the market that was why the Reserve Bank expected investments will drop in the upcoming period.
Finally, the Reserve Bank governor said that the current monetary policy is consistent for economic conditions in Australia, while he emphasized that the bank will continue monitoring improvements in economic activities and its effect on growth rates to make inflation rate settle within the target area.
Mr. Stevens said in his statement that the world economy started to show clear signs of stability, thanks for the global stimulus plans set by governments around the world that led to an improving outlook for the world economy. He added that the U.S economy reached a turning point, while the economy in the euro zone is still weak.
As for China, it showed strong growth rates during the last few months that was one of the pillars that supported the Australian economy to face weak world demand after the financial crisis being the worst since the postwar period.
However, Mr. Stevens mentioned that confidence in financial markets around the world continued to improve, despite obstacles found in credit markets, and that economic weakness on asset quality is representing the real challenge for the economy. He also signaled that economic conditions appear to be stronger than forecasts during the last months, especially with resilience in consumer spending and in exports, which is supporting consumer confidence and the business sector. As a consequence, fears from deteriorating economic conditions in the economy reduced.
There are concerns about weak industrial output, besides declining consumer spending and investments during the upcoming period, but Stevens said that the economy will be supported by domestic spending and the improving housing sector that will make us witness economic expansion in 2010.
As for inflation, Stevens said that it is moderating after it was affected by declining energy and primary goods prices in addition to the slowing economy and weak demand. He expected that moderating inflation will last during this year along with an increasing currency value which is leading to a moderating inflation rate.
Mr. Stevens described the housing and credit markets as solid, as he referred to the incline in house prices in the last months. Companies postponed investing plans as it is seeking tighter credit criteria in the market that was why the Reserve Bank expected investments will drop in the upcoming period.
Finally, the Reserve Bank governor said that the current monetary policy is consistent for economic conditions in Australia, while he emphasized that the bank will continue monitoring improvements in economic activities and its effect on growth rates to make inflation rate settle within the target area.
