RBA holds firm on rates

The Reserve Bank has kept interest rates on hold at its first board meeting of the year, after reducing the cash rate to a historic low of 3 per cent in December.

A majority of economists had tipped the RBA to stay its hand, with financial markets pricing in just a 16 per cent chance of a rate cut today. However, both economists and financial markets are still tipping the central bank will cut again as early as next month.

A recent spate of economic data has pointed to a softening Australian economy, with unemployment edged higher amid expectations that mining investment would peak in 2013.

Economists said while the RBA was not expected to continue its easing cycle this month, which has seen it lower rates by 175 basis points since November 2011, it was likely to issue a dovish statement pointing to a possible cut in March instead.

The decision came amid a busy week of economic data.

Today, data released showed that new vehicles sales were up 11.3 per cent last month from the year before, while a Bureau of Statistics report revealed that house prices had risen 1.6 per cent in the fourth quarter of 2012.

Yesterday, a series of indicators highlighted that building approvals for December were weaker than forecast, while the ANZ job advertisements survey fell for the 11th straight month and and inflation remain subdued.

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