RBA keeps rates at record lows Rates on hold The Reserve Bank has left the official cash rate at 2.5%, as widely expected by the markets. PT2M1S http://www.brisbanetimes.com.au/action/externalEmbeddedPlayer?id=d-2upz9 620 349 October 1, 2013 - 2:46PM The Reserve Bank has kept interest rates on hold for the second consecutive month, in a further shift towards a neutral stance as improving data boosts hopes that previous cuts are lifting the economy. There's certainly no signs here of a November rate cut ... at this stage. Deutsche Bank economist Phil O'Donaghoe The cash rate, which is already at a 60-year-low, remained at 2.5 per cent, matching economists and the market's expectations. An end of the cycle? "At today's meeting, the Board judged that the setting of monetary policy remained appropriate," RBA governor Glenn Stevens said in a statement. 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. Mr Stevens added that a weaker Australian dollar would be welcome, strengthening his wording about the dollar from "would have to foster" to "would assist." "The Australian dollar rose recently, but is still about 10 per cent below its level in April," he said, adding that "a lower level of the currency than seen at present would assist in rebalancing growth in the economy." He added that while there has been a recent improvement in household and business sentiment, "it is too soon to judge how persistent this will be." While the growth in the housing market has dominated headlines in recent days, Mr Stevens only briefly touched on the property sector, noting an increased demand in finance by households and a shift in savers' behaviour. Encouraging economic data Mr Stevens added that "the easing in monetary policy since late 2011 has supported interest-sensitive spending and asset values" but that the full effects were "still coming through." Deutsche Bank economist Phil O'Donaghoe said the new comments showed the RBA was encouraged by signs that the effects of monetary policy easing were filtering into the wider economy. I think that is a more important statement than the discussion on the currency. There's certainly no signs here of a November rate cut ... at this stage," Mr O'Donaghoe said. Bank of America Merrill Lynch chief economist Saul Eslake said the RBA's final sentence in its statement - which is scrutinised to indicate the bias being held by the central bank - suggested that it was adopting a neutral stance. Clearly the RBA is not thinking about raising rates anytime soon. But nor are they giving much hint that they have any plan to cut them," Mr Eslake, who expects the RBA to ease the cash rate one more time by the first-quarter of next year, said. Analysts said the central bank's board members would be weighing the recent strength in the Australian dollar against the recovering property sector. Some tipped the RBA might return to an easing bias amid a rise in the currency following the US Federal Reserve's decision to delay a wind back of its stimulus programs. But the Reserve Bank did not refer to the scope for further easing that a benign inflation would afford them, preferring instead to continue the more neutral phrasing adopted in the September statement. House prices at new highs Earlier today, new figures showed that retail sales rose by a seasonally adjusted 0.4 per cent in August, surpassing economists' expectations of a 0.3 per cent rise. It was driven by a 6.4 per cent lift in department store sales. At the same time, capital city home values hit a new record high last month, with Sydney growing by 5.2 per cent. In contrast, prices slipped in Hobart by 3 per cent - the weakest performing capital city market. Meanwhile, activity in the manufacturing sector lifted for the first time in two years on the back of a falling Australian dollar and lower interest rates. The Australian Industry Group's Performance of Manufacturing Index (PMI) rose 5.3 points to 51.7 in September, figures released today showed. While economists had not expected another rate cut today, some said they forecast another cut by the end of the year to help stimulate the economy as it transits away from resources-led growth.