Economy

Australia's central bank holds rates at record lows, signals patience on policy

Australia's central bank holds rates at record lows, signals patience on policy”

The Reserve Bank has left official interest rates on hold for a 14th consecutive month with no signs it is in a hurry to increase then any time soon.

For more than a year, the cash rate has held at its record-low rate of 1.50 per cent, with many expecting the rate to remain at this level for another month.

Yet policymakers are not in favour of further stimulus with household debt at an all-time peak of 190 per cent of disposable income, and rising at a faster pace than wages growth.

The Australian dollar, which dipped earlier in the day following the release of building approvals data, fell another fifth of a United States cent following the announcement to just above US78¢.

The Reserve Bank of Australia (RBA) expressed concerns over snail-paced wages growth and the lofty Australian dollar, which is adding to subdued price pressures in the economy.

RBA governor Philip Lowe last month said an expected lift in interest rates globally did not have automatic implications for Australia but would flow through to the local market over time.

The decision was widely expected, with the market pricing in no chance of a move ahead of the meeting, and none of the leading market economists forecasting a change. Non-mining investment has also picked up with the RBA happy that firms are rediscovering their "animal spirits".

"That said, the Reserve Bank now has far more reasons to do nothing that act, so it is highly likely the cash rate will stay at 1.50 per cent for yet another month".

Mr. Lowe continues to talk down suggestion that the RBA will join the hawkish chorus of its global counterparts, but economists expect that any upturn in wages growth could prompt the RBA to shift its policy stance if it looks sustainable. The global economy offers little assurance either, with low inflation a sticky issue just about everywhere.



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