THE Reserve Bank of Australia has keep its cash rate at 4.25 per cent following its February board meeting.
The decision surprised the market, as 13 of the 14 economists surveyed by AAP had said there would be a quarter of a percentage point rate cut today.The RBA cut its benchmark interest rate at both its November and December board meetings by a quarter of a percentage point each time, taking it to 4.25 per cent from 4.75 per cent.
The two consecutive cuts last year were made to maintain growth in the Australian economy in the face of pessimism about the European government debt crisis and its affect on the wider world economy and markets.
RBA governor Glenn Stevens said in a statement that acute financial pressures on banks in Europe were alleviated considerably late in 2011 following actions by eurozone leaders.
"Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made," Mr
Stevens said.
"Financial market sentiment, though remaining skittish, has generally improved since early December.
"Share markets have risen and term funding markets have reopened, including for Australian banks, albeit at increased cost compared with the situation prevailing in mid 2011."
