Rational behind the interest rates being left on hold
As reported yesterday, the Reserve Bank has decided to leave the official cash rate on hold.
Speaking about the decision, RBA governor Glenn Stevens said since the board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets.
“Investors have generally displayed a good deal more caution. As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns. The Australian dollar fell sharply as part of this adjustment,” Mr Stevens said.
“Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.”
This will give people some confidence that the rapid increases that we have seen from the Reserve Bank over the last six months are not going to continue forever and appear to be definitely easing off.
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