The Reserve Bank of Australia decided to leave the cash rate unchanged at 4.5 percent after its September board meeting.

This decision by the Reserve Bank of Australia is the third month since June this year that they’ve decided not to increase rates.  Interest rates have now increased by 1.5% since October last year and are now “around their average levels of the past decade”, according to the Governor of the RBA, Glen Stevens.

The decision by the RBA not to increase interest rates is in part due to the impact the sovereign debt concerns and possible defaults in Europe are having on the global financial markets.

Global share markets have experienced heavy falls and experienced substantial volatility with the Australian share market down 7.9% in May, the worst May performance since May 1984 and the worst month since October 2008.  Also, as investors have fled riskier assets the Australian dollar has been sold off heavily falling US9cents in May, its sharpest decline since October 2008.

The other reasons why the RBA decided not to increase interest rates is that on balance they expect inflation “to be in the upper half of the target zone over the next year” and they would like to see what impact the higher interest rates are having on the broader economy.

The statement by Glen Stevens seems to indicate that rates are on hold until later this year, by stating that “the Board view this setting of monetary policy as appropriate for the near term”.