ZCZC
BCN-07
AUSTRALIA-ECONOMY-RATES
Australia’s central bank hold rates, eyes trade spat
SYDNEY, July 3, 2018 (BSS/AFP) – Australia’s central bank kept interest
rates on hold for its 21st-straight meeting Tuesday as consumer spending and
inflation remain weak, while it also cited uncertainty about global trade
tensions while.
The Reserve Bank of Australia slashed the cash rate from November 2011 to
August 2016 to a record-low of 1.50 percent to boost the economy as it
transitioned away from an unprecedented mining investment boom.
It has sat on the sidelines since then, with high household debt and slow
wages growth affecting consumer spending even as business conditions and
investment improve.
“The low level of interest rates is continuing to support the Australian
economy,” RBA governor Philip Lowe said in a statement after its monthly
board meeting.
“Further progress in reducing unemployment and having inflation return to
target is expected, although this progress is likely to be gradual.”
Inflation has also remained soft, although the central bank sounded an
optimistic note about the recent rise in labour force participation and
strong growth in employment.
“There is a Groundhog Day feel to RBA meetings at the moment,” Commonwealth
Bank of Australia senior economist Gareth Aird said.
“The RBA’s decision to leave policy unchanged today was no surprise. And
the governor’s statement confirms that a rate rise is still some way off.”
The central bank eased its warnings about the Australian dollar — which
has weakened against its US counterpart in recent months — and dropped
comments about the risks of an appreciating currency.
But it was less optimistic about the economic climate, noting that there
was “uncertainty regarding the global outlook (stemming) from the direction
of international trade policy in the United States”.
The housing market, which has boomed in recent years and sent property
prices soaring, has softened of late, making the RBA less likely to tighten
monetary policy in the near-term, economists said.
“Growing concerns about the global trade dispute and the deepening domestic
housing downturn mean that the RBA will probably leave interest rates at 1.5
percent… until late next year,” Capital Economics’ chief Australia and New
Zealand economist Paul Dales said.
“While a rate cut remains improbable, it is becoming increasingly likely
that interest rates may not be raised until 2020.”
BSS/AFP/MR/ 1202 hrs