RBA leaves rates alone

The Reserve Bank of Australia has left its official cash rate unchanged at 3 per cent at its April board meeting.

RBA governor Glenn Stevens said inflation was likely to be consistent with forecasts and growth would come in a little below trend, so leaving rates on hold was appropriate.

"The inflation outlook, as assessed at present, would afford scope to ease policy further, should that be necessary to support demand," Mr Stevens said.

"At today's meeting, the Board judged that it was prudent to leave the cash rate unchanged.

"The Board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the target over time."

The RBA cut the cash rate four times between May and December in 2012, reducing the rate by 1.25 percentage points.

Mr Stevens said there were a number of indications that easing of monetary policy was having an expansionary effect on the economy.

" Further such effects can be expected to emerge over time," he said.

"On the other hand, the exchange rate, which has risen recently, remains higher than might have been expected, given the observed decline in export prices.

"The demand for credit has also remained low thus far, as some households and firms continue to seek lower debt levels."

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.