Australia holds rates steady at 4.75 percent

Australia kept official interest rates steady at 4.75 percent Tuesday, citing slower global growth due to Japan's March earthquake, European debt problems and surging commodity prices. The Reserve Bank of Australia left the official cash rate unchanged for the seventh time since November - the last time they were raised - saying it now believed domestic growth was "unlikely to be as strong as earlier forecast."
Resumption of coal exports following the summer's damaging floods and cyclones was proceeding "more slowly than initially expected", while consumer caution and the strong exchange rate was dampening activity, the RBA said. Globally, the bank said headwinds had grown, with banking and sovereign debt problems in Europe stoking uncertainty and volatility and conditions seen as "challenging".
"The global economy is continuing its expansion, but the pace of growth slowed in the June quarter," said RBA governor Glenn Stevens. "The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries have both contributed to the slowing." The commodities boom had sent Australia's terms of trade soaring, with national incomes growing strongly, though household credit had softened and housing prices had eased.
The outlook for the key mining and energy sector was "very positive" and the medium-term outlook for growth was for trend or higher, with inflation also expected to be close to target over the next 12 months. "At today's meeting, the board judged that the current mildly restrictive stance of monetary policy remained appropriate," said Stevens. "In future meetings, the board will continue to assess carefully the evolving outlook for growth and inflation."
The Australian dollar fell to 1.0677 against the US dollar after the widely expected announcement, from 1.0701 shortly before. Analysts said rates looked to be on hold for a while longer, with the RBA's tone more downbeat than the previous month. "The RBA does appear to be a little less upbeat about the outlook than they were a month ago," said ANZ economist Katie Dean. "They are more concerned about the downside risks to the global economy at the moment as well. It does suggest the view that rates are likely to remain on hold for some time," she added.