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Financial News: Australia Keeps Record Low Rate On Hold

Australia Keeps Record Low Rate On Hold

10/02/2018 - 03:54:00 (RTTNews)

(RTTNews) - Australia's central bank decided to keep its benchmark interest rate unchanged at a record low, on Tuesday, for the 25th consecutive meeting.

The board of the Reserve Bank of Australia, governed by Philip Lowe, voted to maintain the cash rate at 1.50 percent. The interest rate has been at the current level since August 2016.

"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank repeated on Tuesday.

Policymakers reiterated that the low level of interest rates is continuing to support the Australian economy.

Although further progress in reducing unemployment and having inflation return to target is expected, this progress is likely to be gradual, the bank repeated the view it expressed in September.

According to the RBA, the outlook for the labor market remains positive. The improvement in the economy should see some further lift in wages growth over time.

Inflation is around 2 percent. The central forecast is for inflation to be higher in 2019 and 2020 than it is currently.

The national accounts confirmed strong economic growth of 3.4 percent in the second quarter. The bank forecast a bit above 3 percent growth in 2018 and 2019.

However, one continuing source of uncertainty is the outlook for household consumption. Growth in household income remains low and debt levels are high.

If economic conditions continue to evolve in line with the Bank's expectations, it may be in a position to raise interest rates in the second half of next year, Marcel Thieliant, an economist at Capital Economics, said.

The economist said the full effects of tighter credit conditions and falling house prices have yet to be felt. That means the labor market will tighten only slowly and inflation won't rise much.

Thieliant expects the central bank not to raise interest rates until the second half of 2020.

On property market, the bank said conditions in the Sydney and Melbourne housing markets have continued to ease and nationwide measures of rent inflation remain low.

Growth in credit extended to owner-occupiers remains robust, but demand by investors has slowed noticeably as the dynamics of the housing market have changed.

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