Reserve Bank pockets its itchy trigger finger

07 June 2011

The Reserve Banks decision to tone down its language on the prospect of future interest rate rises is a welcome move, according to the Urban Taskforce.

The banks board today chose to keep the official cash rate at 4.75 per cent, following its decision to increase rates by 25 basis points in November last year. 


The Taskforces chief executive, Aaron Gadiel, said that the Reserve Banks ominous threats of further interest rate rises had unnecessarily dampened business confidence.


At its May meeting the Reserve Bank board minutes said that if economic conditions continued to evolve as expected, higher interest rates were likely to be required ….


In todays statement Reserve Bank Governor, Glenn Stevens, concedes that CPI inflation will be close to target over the next 12 months.


As a result Mr Stevens admitted that the Board judged that the current mildly restrictive stance of monetary policy remained appropriate.


Mr Gadiel said that the Reserve Bank had back-tracked, and returned to its pre-May position, which favoured the status-quo on interest rates.


The bank mustnt allow its excitement at the strength of the resources industry to blind it to the challenges being faced by other parts of the economy, particularly the building sector, he said.


Fears that the Reserve Bank has an itchy trigger finger on interest rates have already caused some building plans to be shelved or delayed.


We hope the bank will be less keen to raise the spectre of new interest rate rises in future monetary policy statements.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


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