SYDNEY, June 21 (Reuters) - - Keeping interest rates steady this month was consistent with sustainable economic growth and inflation returning to target over time, Australia’s central bank said on Tuesday.
The Reserve Bank of Australia (RBA) left the cash rate unchanged at a record low 1.75 percent at the June 7 policy review and minutes of the meeting gave no indication that it would ease again anytime soon.
“Members began their discussion of the Australian economy by noting that growth in real GDP in the March quarter was stronger than anticipated,” the minutes revealed.
“Growth was expected to be more moderate in the June quarter, but year-ended growth was likely to remain slightly above estimates of potential.”
In May, the RBA had surprised the market by delivering a cut in interest rates due to disturbingly low inflation. The central bank said inflation was expected to remain subdued for some time.
For now, low interest rates and a weaker local dollar were underpinning the economy, which has in turn helped drive the unemployment rate down to 5.75 percent from 6.25 percent over the year to the March quarter.
“More timely labor market data indicated that the unemployment rate had remained around 5.75 percent, but that employment growth appeared to have lost some momentum following very strong growth in late 2015, which was largely as expected,” the minutes said.
The RBA also noted that tighter supervision by regulators on the banks had resulted in stronger lending standards.
“Housing prices had begun to rise again recently, particularly in Sydney and Melbourne. The extent of future rises, however, was likely to be affected by the considerable supply of apartments scheduled to come on stream over the next couple of years,” the central bank said.
“Given these developments, and following the reduction in the cash rate in May, the Board judged that leveling the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and inflation returning to target over time.”