November RBA interest rate decision: HOLD.
It appears last quarter's lower-than-expected inflation numbers released by the Australian Bureau of Statistics were not enough to tempt the Reserve Bank of Australia's (RBA) hand in lowering official interest rates today.
The RBA said:
"While GDP growth has been somewhat below longer-term averages for some time, business surveys suggest a gradual improvement in conditions over the past year. This has been accompanied by somewhat stronger growth in employment and a steady rate of unemployment."
"Inflation is low and should remain so, with the economy likely to have a degree of spare capacity for some time yet. Inflation is forecast to be consistent with the target over the next one to two years, but a little lower than earlier expected."
Despite core inflation of just 2.1% being marginally inside the RBA's target range of 2% to 3%, the RBA was happy to keep record-low 2% official interest rates as they were.
A lower dollar has enabled both the mining and non-mining sectors of the economy to become more competitive generally, the RBA said.
Moreover, regulatory change and increases in interest rates on major bank mortgages provide relief in surging house prices throughout Australia. "Supervisory measures are helping to contain risks that may arise from the housing market," the RBA said.
In October, the RBA said, "further information on economic and financial conditions to be received over the period ahead will inform the board's ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target." Many pundits expected this statement left the window open for the central bank to adopt an easing bias.
Yet today, the RBA simply said leaving rates unchanged was appropriate to support demand and it would continue to monitor inflation and the growth outlook. Indeed, despite the hold decision it acknowledged, "the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand." Adding, "The Board will continue to assess the outlook, and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target."
3 stocks to benefit
While the Australian dollar could be expected to head higher from here, selling of shares in Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and National Australia Bank Ltd. (ASX: NAB) may put downwards pressure on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Savvy investors could look to use any weakness in share prices as an opportunity.
