The Reserve Bank of Australia (RBA) has kept Australian interest rates at 1.5% (HOLD) for a fifth straight month. The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is trading 0.8% higher.
Commenting on the decision to keep rates at 1.5%, RBA Governor Philip Lowe said: "Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 has been helping the traded sector."
Leading into today's meeting, economists widely expected interest rates to remain on hold despite inflation running at 1.3% and the dollar trading as high as US 74.74 cents.
Following a bout of expected volatility in global markets earlier this week, stemming from the Italian constitutional referendum, the Australian dollar soared as much as 0.5%. Ideally, a lower Australian dollar would boost the economy.
Given the high probability that interest rates would be kept on hold, investors were most eagerly awaiting the RBA's economic outlook commentary.
In recent updates, the RBA has made note of the strength in Australian housing. "Conditions in the housing market have strengthened overall, although they vary considerably around the country," the RBA minutes read. "In some markets, prices are rising briskly, while in others they are declining. Housing credit has picked up a little, although turnover of established dwellings is lower than it was a year ago. "
The outlook for domestic conditions and the RBA's stance on interest rates has the greatest impact on Australia's banks, including Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd. (ASX: NAB) and Australia and New Zealand Banking Group (ASX: ANZ). Shares of the big four banks were trading around 1% higher today.
Leading into Christmas the RBA and investors will hope a consistent stance on monetary policy will boost confidence and consumption activity.
"Taking account of the available information, and having eased monetary policy earlier in the year, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the RBA concluded.
