Australian Monetary Policy Stance Still on Hold

June 5, 2018

The Reserve Bank of Australia’s official cash rate was last changed in August 2016 when it was cut 25 basis points to 1.50%. Each ensuing policy review — done once every month except January — has stuck with that status quo, although the direction of the rate’s next change is more likely to be up than down. A statement released from Governor Lowe following this month’s meeting fails to include any hint of being close to a rate hike, as last week’s statement from the Bank of Canada had.

To be sure, the statement observes that since the last review “higher rates in the United States have flowed through to higher short-term interest rates in a few other countries, including Australia.” And Lowe affirms that “further progress in reducing unemployment and having inflation return to target is expected.” He adds, however, that this process is happening gradually, leaving the presumption that there’s no urgency to tighten soon. Wage growth is low and only bottomed recently. Also, a “continuing source of uncertainty is the outlook for household consumption. Household income has been growing slowly and debt levels are high.┬áNationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas.” In conclusion for now, “the low level of interest rates is continuing to support the Australian economy.”

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

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