Reserve Bank of Australia’s Official Cash Rate Left at 1.5%

February 6, 2018

The OCR has been 1.5% since the second of two 25-basis point cuts in 2016, which was engineered in August. The Reserve Bank of Australia Board schedules policy reviews on a monthly basis but skips January each year. At this first meeting in two months, policy was left unchanged. Inflation is still below the floor of a 2-3% target range. In a released statement, officials project growth of around 3% and a gradual rise in inflation to a bit above 2% in 2018. “Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing….┬áthe 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.” Not that further reason was needed to maintain the policy status quo, the extreme volatility of world financial markets from which Australia has not been immune likely made the decision an easy one. The statement reiterated concern about the outlook for personal consumption in light of a high level of household debt. That too argues for caution.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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