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RBA Reaction - Rates steady as RBA gauges response to stimulus

By Garry Shilson-Josling, AAP Economist
03 Mar 2009 3:04 PM

SYDNEY, March 3 AAP - The Reserve Bank of Australia (RBA) resolved the uncertainty in financial markets, at least for another month, by opting to keep interest rates steady for the first time since August last year.

In an announcement following the central bank's monthly board meeting on Tuesday, RBA governor Glenn Stevens said fiscal and monetary policy stimulus measures already undertaken "will provide significant support to domestic demand over the period ahead".

On that basis and despite current economic weakness, he said the stance of monetary policy was appropriate "for the moment".

"The board will consider the position again at its next meeting," he said.

Ahead of the announcement, opinions were split on the likelihood of a cut, after hints in recent RBA speeches and reports that a pause may be under consideration.

The futures market had factored in a quarter of a percentage point move to 3.00 per cent.

The national accounts on Wednesday and subsequent economic data will drive expectations for the outcome of the next RBA board meeting, to be held on April 7.

Given the ongoing decline in global economic growth and likelihood of further fallout of the domestic economy, further rate cuts seem most likely, but that view was not backed by the RBA's equivocal statement on Tuesday.