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The Reserve Bank has kept interest rates at 3 per cent for the second month in a row at its March board meeting today.
A majority of economists had expected the RBA to stay its hand, with the markets pricing in an 11 per cent chance the central bank would reduce the cash rate.
The Reserve Bank’s decision came after a raft of economic data released this morning pointed to the suggestion that there were early signs the 50 basis points of cuts in October and December were filtering through to the economy.
Retail sales rose by 0.9 per cent for the month of January, surpassing economists’ expectations, following three consecutive months of falls.
At the same time, the current account deficit narrowed and there was an increase in government spending for the fourth quarter of 2012.
The Australian dollar remained unchanged, at just above $US1.02, following the widely expected decision.
RBA Governor Glenn Stevens said in a statement that the board had decided it was prudent to leave the cash rate unchanged.
"At today's meeting, taking into account the flow of recent information and noting that there had been a substantial easing of policy as a result of previous decisions, the Board judged that it was prudent to leave the cash rate unchanged," Mr Stevens said.
"During 2012, there was a significant easing in monetary policy. Though the full impact of this will still take more time to become apparent, there are signs that the easier conditions are having some of the expected effects."
Mr Stevens noted again that the Australian dollar remained higher than expected, despite the fall in export prices and the low demand for credit as some Australians reduce their debt levels.
‘‘Looking ahead, the peak in resource investment is approaching, as it does, there will be more scope for some other areas of demand to strengthen,’’ Mr Stevens said.
‘‘Dwelling investment appears to be slowly increasing, with higher dwelling prices and rental yields.’’
Mr Stevens said conditions that were hurting global economic growth have eased in recent months.
‘‘The United States is experiencing a moderate expansion and financial strains in Europe are considerably reduced compared with the situation through much of last year.
‘‘Around Asia generally, growth was dampened by the earlier slowing in China and the weakness in Europe, but again there are signs of stabilisation,’’ Mr Stevens said.
RBA interest rate decisions in current easing cycle:
2012
Dec 5, -0.25, to 3 per cent
October 3, -0.25, to 3.25 per cent
June 6, -0.25, to 3.5 per cent
May 2, -0.50, to 3.75 per cent
2011
December 7, -0.25, to 4.25 per cent
November 2, -0.25, to 4.5 per cent