Australia\'s Central Bank says growth on trend

Australia\'s central bank kept interest rates steady at 4.25 percent Tuesday, saying growth was close to trend and inflation near target even as it hinted a rate cut may be in the offing next month. Reserve Bank of Australia (RBA) governor Glenn Stevens said the board decided at its monthly monetary policy meeting that the current setting was correct, after easing rates in late 2011. \"Since then, its judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate,\" Stevens said. But he added that the board\'s view was also that, \"were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy\". Australia was the only advanced economy to survive the global downturn without entering recession, and thanks to its vast mineral resources and proximity to growing Asia it is riding an unprecedented mining boom. Canberra expects growth of 3.25 percent for 2011-12, but the commodities rush has left a \"patchwork\" economy, where mining is booming but industries such as tourism and manufacturing are lagging due to the soaring Aussie dollar. \"There are differences in performance between sectors, and considerable structural change is occurring,\" said Stevens, adding that labour conditions had softened in 2011, though unemployment was little changed at 5.2 percent. Stevens said while the bank judged the pace of output growth to be lower than earlier estimated, it deemed it wise to wait for key data on prices to reassess its outlook for inflation before taking steps to ease rates. \"At today\'s meeting, the board judged the pace of output growth to be somewhat lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy,\" he said. In underlying terms, inflation was around 2.5 percent in 2011 and it was expected that inflation would be within the RBA\'s target range of 2-3 percent over the coming one to two years, he added. Analysts took the statement as an indication of a possible cut at the RBA meeting in May which will be the first after the release of consumer price index (CPI) data for the March quarter, on April 24. \"Rarely does the RBA signal this clearly an intention to cut rates at its next opportunity, barring surprises in data over the coming month,\" Greg Gibbs, senior currency strategist at RBS in Australia told Dow Jones Newswires. The Australian dollar dipped on the announcement and was trading at 104.00 US cents shortly after 0600 GMT, down from 104.33 US cents ahead of the decision. Stevens said while the world economy was expected to grow at a below-trend pace this year -- with several European countries to record very weak results -- data did not suggest that a deep downturn was occurring. The United States economy was continuing a moderate expansion while growth in China was likely to remain at a more measured and sustainable pace in the future, he added.