07/02/12: Rates left on hold

The Reserve Bank has shocked the markets and homeowners by deciding to keep rates on hold at 4.25 per cent.

Despite overwhelming pressure for a rate cut the RBA has adopted a more conservative "wait and see" approach after two consecutive rate cuts last year.

The Australian dollar shot above $US1.08 immediately after the RBA announcement and the stock market shed 35 points as investors digested the surprise move. The RBA board judged the setting was "appropriate" as growth was close to trend, lending rates were close to their medium term average and inflation close to its target level.

Clearly, the RBA has left the door wide open for future rate cuts, depending on whether global and local economic conditions deteriorate much further.    Rick Maggi