Australia's central bank holds interest rates at 2.5%

[SYDNEY] Australia's central bank on Tuesday held interest rates at a record low 2.5 per cent, signalling its intention to keep an accommodative monetary policy while saying a weaker exchange rate was needed to support growth.

It was the 15th consecutive meeting in which the Reserve Bank of Australia has left the cash rate unchanged, and reflected opposing pressures on the economy with a booming housing market and slumping commodity prices.

In a commentary on the decision, bank governor Glenn Stevens said "monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target".

"On present indications, the most prudent course is likely to be a period of stability in interest rates."

The bank reinforced its call for a weaker Australian dollar, which it believes is slowing a rebalancing of the economy away from mining-led growth as resources investment is expected to sharply fall off after an unprecedented boom.

"A lower exchange rate is likely to be needed to achieve balanced growth in the economy," Stevens said in comments adding to previous remarks that said the currency "remains above most estimates of its fundamental value".

The bank retained its view of moderate growth in the Australian economy, saying that while a slight below-trend forecast remained, there were signs of improving non-mining private demand.

AFP