HOMEOWNERS can breathe easy for another month after the Reserve Bank left interest rates unchanged at 3 per cent at its monthly board meeting.
Most economists had expected the central bank to keep the cash rate steady.
The RBA cut the cash rate four times between May and December in 2012, reducing the rate by 1.25 percentage points.
RBA governor Glenn Stevens said with economic growth expected to be a little below trend over the coming year, it was prudent not to change the cash rate.
However the central bank has room to cut if economic conditions deteriorate.
“The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand,” he said.
Mr Stevens said the risks to the global economy appeared to have eased in recent months while commodity prices, a key driver of the Australian economy, remained high by historical standards.
The Australian dollar fell by 0.1 of a US cent after the RBA left the cash rate unchanged with the currency at 104.50 US cents at 2.32pm AEDT, down from 104.60 US cents shortly before the bank’s decision was announced.
AMP Capital chief economist Shane Oliver it appeared the RBA was in “wait and see mode” on interest rates.
The RBA faced the dilemma that while lower interest rates were having some effect on the economy, the Australian dollar remained high and credit growth was weak.
“There’s no indication that they’re about to move next month,” Mr Oliver said.
“To get further the easing, the signs of improvement that we’re currently seeing would have to peter out or there’d have to be some sort of global shock and they certainly don’t seem in any rush to move.”
UBS economist George Tharenou said that although a further interest rate cut was possible, it was looking increasingly likely the RBA would keep the cash rate on hold for the rest of 2013.
Mr Tharenou said said a recent improvement in house prices was a sign that last year’s interest rate cuts were having the desired effect on the economy.
He said the RBA appeared more confident that the non-mining sectors of the economy would pick up in 2013 as the mining investment boom peaked.
“Our view is that, baring some unforeseen risk event, the RBA is going to remain on hold from here,” he said.