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Financial News: Australia Maintains Record Low Interest Rate

Australia Maintains Record Low Interest Rate

06/05/2018 - 03:53:00 (RTTNews)

(RTTNews) - Australia's central bank left its key interest rate unchanged at a record low for the 20th consecutive meeting, on Tuesday.

The board of the Reserve Bank of Australia, governed by Philip Lowe, maintained the cash rate at 1.50 percent. The bank had reduced the rate by 25-basis points each in August and May last year.

At the meeting, the Board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.

The Australian Bureau of Statistics is slated to issue quarterly national accounts data on June 6. The economy is forecast to grow 0.8 percent sequentially in the first quarter, faster than the 0.4 percent expansion seen a quarter ago.

The bank repeated 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 noted.

The central forecast is for CPI inflation to be a bit above 2 percent in 2018.

An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast, RBA noted.

Further, the bank observed that housing credit growth has slowed over the past year, especially to investors. Nonetheless, the bank said the level of household debt remains high.

While there may be some further tightening of lending standards, the average mortgage interest rate on outstanding loans is continuing to decline, the bank added.

A tightening in credit conditions will contribute to the RBA keeping interest rates at 1.5 percent until late next year, Paul Dales, an economist at Capital Economics, said.

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