Reserve Bank Governor Glenn Stevens / File

The Reserve Bank of Australia has left the official interest rate on hold at 2.25%.

Most economists were expecting a cut this month.

Here’s the key paragraph from the statement:

At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings.

So, a clear easing bias in that last part of the statement, with room for more cuts ahead if needed.

On the housing market, where rising prices have been a source of rising concern among economic commentators recently, the RBA noted that prices “continue to rise strongly in Sydney” but added “trends have been more varied in a number of other cities over recent months”.

On the currency, the RBA remains of the view that the Aussie dollar is still “above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy.”

The Australian market tanked on the news, falling more than 0.8% before recovering slightly. All the major components of the market fell, including the big four major banks, led by the Commonwealth down 0.76% to $91.850.

The dollar jumped slightly on the news, and was up around half a cent against the greenback a short time ago.

The thing to remember with the RBA is that they do nothing at most meetings. They leave rates unchanged. In the absence of a cut the clear and unequivocal easing bias is the next best thing. It tells us more rate cuts are coming. Crucially it should give consumers confidence that a steady hand is still on the wheel and this is no time for panic.

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