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Financial News: Australia Retains Record Low Interest Rate

Australia Retains Record Low Interest Rate

07/04/2017 - 02:01:00 (RTTNews)

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

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

"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 said in a statement.

As underlying inflation remains persistently weak, Capital Economics' economist Kate Hickie said, the rates are likely to stay on hold throughout the rest of 2017 and 2018.

The Australian economy is expected to strengthen gradually, with the transition to lower levels of mining investment following the mining investment boom almost complete.

Business investment picked up in areas not directly affected by the decline in mining investment. At the same time, consumption growth remains subdued, reflecting slow growth in real wages and high levels of household debt, RBA said.

Indicators of the labor market remain mixed, the bank noted. The various forward-looking indicators point to continued growth in employment over the period ahead.

Further, the bank said wage growth remains low, however, and this is likely to continue for a while yet. At the same time, inflation is forecast to increase gradually as the economy strengthens.

The outlook continues to be supported by the low level of interest rates. The depreciation of the exchange rate since 2013 has assisted the economy in its transition following the mining investment boom.

An appreciating exchange rate would complicate this adjustment, RBA noted.

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