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Financial News: RBA Holds Key Rate Steady At Historic Low

RBA Holds Key Rate Steady At Historic Low

04/02/2019 - 01:46:00 (RTTNews)

(RTTNews) - The Reserve Bank of Australia on Tuesday left its benchmark interest rate unchanged, acknowledging that the labor market continued to be "strong" despite soft economic growth seen late last year.

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 remained at the current level since August 2016.

The decision was widely expected by economists.

"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.

The bank noted that the low level of interest rates is continuing to support the Australian economy.

Policymakers expect further progress in the reduction of unemployment and inflation returning to target, although this progress is likely to be gradual.

The RBA said that the outlook for the global economy remained reasonable, even as growth has slowed and downside risks have increased.

"Growth in international trade has declined and investment intentions have softened in a number of countries," it said.

The RBA struck a cautious tone about economy, saying that the GDP data painted "a softer picture of the economy than do the labour market data."

"Growth in household consumption is being affected by the protracted period of weakness in real household disposable income and the adjustment in housing markets. The drought in parts of the country has also affected farm output," it said.

"Offsetting these factors, higher levels of spending on public infrastructure and an upswing in private investment are supporting the growth outlook, as is the steady growth in employment."

The bank noted that inflation remained low and stable. Although underlying inflation is expected to pick up over the next couple of years, the pick-up has been taking a little longer than expected. The bank left its forecasts for underlying inflation unchanged at 2 percent for this year and 2.25 percent for 2020.

The bank also indicated that the downturn in the housing markets is continuing, after the earlier large run-up in prices in some cities. Housing conditions remained soft and rent inflation remained low.

Growth in credit extended to owner-occupiers has eased, while the demand by investors has slowed noticeably due to changing dynamics of the housing market, it added.

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