The RBA left interest rates unchanged in June saying its six rate hikes since October 2009 represent a significant adjustment to monetary policy, but it left open the prospect of a return from the sidelines within a short period of time saying policy is appropriate only for the "near-term."
The RBA left the official cash rate target at 4.50%, its first pause since February. The statement by RBA Governor Glenn Stevens focused on the inflation challenge ahead, strong commodity prices and highlighting growth in Asia. He said the commodity price boom now washing over the economy will add to both incomes and demand, forecasting output growth over the year ahead is likely to be about trend, even as fiscal stimulus unwinds.
Rising prices for key commodities like iron ore and coal will help boost Australia's terms of trade 20% in 2010, restoring it to historic highs. The consequence of the buoyancy of the economy is that "inflation appears likely to be in the upper half of the (2%-3%) target zone over the next year," Stevens said.