SYDNEY: Australia's central bank left official interest rates on hold at 4.25 percent on Tuesday, saying there did not appear to be a deep global downturn, while the local economy was growing close to trend.
Reserve Bank of Australia governor Glenn Stevens said the board had judged "the setting of monetary policy remained appropriate for the moment", with some improvement in Europe, moderate growth in the US and Asia holding steady.
"Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring," Stevens said following the bank's monthly meeting on interest rates.
It is the second consecutive month rates have been kept on hold, following two rounds of 25-basis-point cuts in November and December. The bank did not hold a meeting in January.
Stevens said Europe "will remain a potential source of shocks for some time yet" as it battles its debt crisis but policy moves had alleviated the acute financial pressures on the region's banks.
Financial market sentiment was improving and interbank and corporate lending was flowing once again.
Locally, commodity prices were "noticeably off their peaks" but had rebounded from a period of decline and were at quite high levels, he added.
Australia was seen as growing close to trend, with structural changes to the economy due to a national pollution tax and other reforms expected to boost productivity, keeping inflation in check.
"Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy," Stevens said.
"The board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation."
Rates had been widely expected to stay on hold but the Australian dollar slipped to a two-week low of 106.10 US cents from 106.53 prior to the news, with analysts saying the bank's statement had not precluded further rate cuts.
"Most of the text is unchanged from the last time, particularly in their discussion of the Australian economy and the globe as well," said RBC economist Su-Lin Ong of the central bank's wait-and-see approach.
"They continue to note that financial pressures have declined a bit, but there are still some challenges to growth globally."
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