Australia central bank holds rates but leaves door open to easing

People walk past the Reverse Bank of Australia building in Sydney.
People walk past the Reverse Bank of Australia building in Sydney.PHOTO: AFP

SYDNEY (REUTERS, BLOOMBERG) - Australia's central bank kept its cash rate steady at a record low of 2.0 per cent on Tuesday (Nov 3), but said low inflation offered scope to ease further if needed.

The Reserve Bank of Australia (RBA) made the announcement following its monthly policy meeting. A Reuters poll of 21 analysts had found 17 expected no change this week, with the remainder calling for a cut.

The Australian dollar held gains after central bank Governor Glenn Stevens refrained from cutting interest rates for the sixth straight month. The currency has weakened 12 per cent against the greenback this year, the worst performer after New Zealand's dollar among Group-of-10 peers.

Mr Stevens is relying on the currency to act as a shock absorber for the drop in prices for Australia's coal and iron ore exports.

"Strength in the Australian dollar on a no-cut announcement may be fleeting and it is likely to fall if the RBA inserts even a modest easing bias into the statement," Greg Gibbs, director of Amplifying Global FX Capital in Singapore, wrote in a note before the policy decision.

The Aussie was up 0.3 per cent to 71.68 US cents as of 2.36 pm in Sydney. It reached a six-year low of 68.96 cents in September.