Reserve Bank keeps interest rates steady at 4.5pc

HOMEOWNERS spared a rate hike as global market turmoil forces RBA to hold steady.

The Reserve Bank has kept rates steady at 4.5 per cent at its June board meeting / File

THE Reserve Bank has left the official cash rate steady at 4.5 per cent.

The decision to pause on rates comes after six interest rate rises in a row since last October.

Many economists correctly tipped rates would stay on hold, and the cash rate is expected to rise to between 4.75 and 5.25 per cent by the end of the year.

RBA Governor Glenn Stevens said interest rates are at “average levels” and economic output is expected to grow in the year ahead, but that the central bank was watching Europe closely.

Since last month's decision to lift rates, worries about the debt of several European countries have rattled investors and pushed global share markets and the dollar lower, Mr Stevens said.

The large aid package for Europe had stablised markets, but "the effects of these various factors on the world economy will need to remain under review," said Mr Stevens.

Nomura Australia chief economist Stephen Roberts said the decision showed the central bank thought the cash rate was appropriate for managing Australia's current economic conditions.

"But it's the things they can't see, like Europe, that bother them,"' he said.

"There are conflicting issues, but on balance they think that policy is appropriate for the near term and by that, they probably means quite a few months.

"They're happy to wait and see how things develop."

Treasurer Wayne Swan said the decision to leave the rate was a "welcome relief'".

"This news will be welcome relief to Australian families and businesses around the country, who are of course doing it tough," Mr Swan told parliament.