The Reserve Bank of Australia surprised the market by keeping interest rates unchanged at 3.25%. Expectations had called for a 25 basis point cut to bring rates to 3.00%. RBA Governor Glenn Stevens said that the Australian economy has not contracted “as much as in other countries” but acknowledged that current conditions are “clearly weak”. Stevens continued saying that although poor economic performance is likely to continue in the near term, the cumulative effects of monetary and fiscal measures already in place will “provide significant support to domestic demand over the period ahead”. With this in mind, the RBA has decided to opt for a neutral position this time around. Importantly, Stevens made sure to dispel any expectations that the bank has broadly settled on a neutral bias, saying “The Board will consider the position again at its next meeting.”
