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Financial News: Australia Leaves Rate Unchanged At Record Low

Australia Leaves Rate Unchanged At Record Low

08/06/2019 - 02:46:00 (RTTNews)

(RTTNews) - Australia's central bank left its key interest rate unchanged at a record low after cutting the rate by 25 basis points each at the previous two meetings.

The board of the Reserve Bank of Australia, governed by Philip Lowe, maintained the cash rate at a record low 1.00 percent, as widely expected, on Tuesday. The back-to-back rate cut in July was the first since mid-2012.

"The Board will continue to monitor developments in the labor market closely and ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time," the bank said in a statement.

Policymakers said it is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.

Marcel Thieliant, an economist at Capital Economics, said it won't be long before the RBA decides that additional easing is required.

After all, employment growth tends to be a lagging indicator of economic activity so the recent strength in jobs growth is unlikely to be sustained. The economist expects a 25 basis point cut in November followed by another 25 basis point reduction in February.

The bank noted that recent labor market outcomes suggest that the Australian economy can sustain lower rates of unemployment and underemployment. Further, inflation is expected to be a little under 2 percent over 2020 and a little above 2 percent over 2021.

Economic growth is forecast to strengthen gradually after low income and declining house prices weighed on growth over the first half of the year.

The economy is expected to grow around 2.5 percent over 2019 and 2.75 percent over 2020. The projection for this year was downgraded from 2.75 percent and that for 2020 was left unrevised.

The central bank is set to release the Statement on Monetary Policy on August 9.

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