No more rate cuts, the Reserve Bank has moved from the promise of a possible further easing, to one of recognising that the current monetary policy setting “is appropriate given the economy’s circumstances.”

So the cash rate on hold at 3 per cent, calling an end to the record loosening in monetary policy that saw interest rates drop 4.25 per cent in a matter of months.

The post meeting statement from Governor Glenn Stevens finished with this paragraph:

“The Board’s judgment is that the present accommodative setting of monetary policy is appropriate given the economy’s circumstances. The Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target.”

That is very different from the concluding paragraph of the July board meeting statement:

“The Board’s current view is that the outlook for inflation allows some scope for further easing of monetary policy, if needed. In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity.”

No more mention of ”some scope for a further easing of monetary policy.”

But no rate increase is in prospect, the bank still points to the fragility of the economy and the global financial system, even though things are looking up.

“Sentiment in global financial markets has continued to improve. Nonetheless, credit conditions remain difficult, and the effects of economic weakness on asset quality present a challenge. For the global economic recovery to be durable, continued progress in restoring balance sheets is essential.”

But as he pointed out last week in a speech in Sydney, Governor Stevens also said in today’s statement:

Economic conditions in Australia have been stronger than expected a few months ago, with both consumer spending and exports notable for their resilience. Measures of confidence have recovered a good deal of ground.

This suggests that the risk of a severe contraction in the Australian economy has abated.

The most likely outcome in the near term is a period of sluggish output, with consumer spending likely to slow somewhat and investment remaining weak.

Stronger dwelling activity and public spending will start to provide more support to overall demand soon, and growth is likely to firm into 2010.