Latest NewsRba Leaves Cash Rate on Hold at 3.75%Sunday, 27 November 2016

The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 3.75 per cent.

The central bank's surprise move marks the first time since its October policy meeting that it has not moved to increase the cash rate.

"Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point," RBA governor Glenn Stevens said in a statement.

"Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.

"Interest rates to most borrowers nonetheless remain lower than average. If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term."

Mr Stevens noted that CPI inflation had risen "somewhat recently", as temporary factors which had been suppressing inflation abated, but said inflation was expected to be consistent with the bank's target in 2010.

He said the global economy was growing, with the recovery much quicker in Asia, although he noted that Chinese authorities were now seeking to wind-back their stimulus measures.

Global financial markets were functioning more effectively, Mr Stevens said, but credit conditions in major economies remained difficult, as banks faced ongoing loan losses and "concerns regarding some sovereigns have increased".

He said that while housing credit had expanded at a solid pace, accompanied by a significant rise in dwelling prices, business credit had continued to fall, particularly among large firms, as companies sought to reduce leverage.

The Australian dollar sank almost a full US cent after the surprise decision. Bill futures surged as the market unwound pricing for a February hike and scaled back expectations for how high rates might rise this year.

March bill futures rallied to 95.78 from 95.570 before while the Australian dollar fell to $US0.8838 from $US0.8920.

Investors had expected a 25 basis point-rate hike.

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