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Australia's central bank extends record spell of stable rates

Reuters  |  SYDNEY 

By Pandey

(Reuters) - Australia's central left rates at record lows on Tuesday, in a widely expected move and marking a 27th straight month of stable policy as it awaits a pick up in inflation and wages growth.

The of Australia (RBA) ended its November board meeting with rates held at an all-time low of 1.50 percent, and signalled policy will stay there for a while yet.

"Inflation remains low and stable," RBA said in a statement. "Inflation is expected to pick up over the next couple of years, with the pick-up likely to be gradual."

"Gradual" remains the watchword as inflation stays stubbornly below the central bank's 2-3 percent target band and wages only barely keep up with consumer prices despite solid job gains.

The will issue updated economic forecasts this Friday and Lowe offered a taster on the outlook, noting that inflation would slightly pick up to 2.25 percent in 2019 and a "bit higher" the following year.

He was more upbeat on the jobs outlook.

"With the economy growing above trend, a further reduction in the unemployment rate is expected to around 4.75 percent in 2020," he said.

That is a marked improvement from the previous central of 5.25 percent for mid-2020 in projections released in August. Tuesday's revised forecast follows an unexpected slip in the unemployment rate to 5.0 percent in September, led by a bumper run in job growth over the past year and as fewer people looked for work.

"The RBA says it quite bluntly that the Australian economy is going quite well and I think that's a pretty apt synopsis of the first half of the year," said Tom Kennedy, at

"I think if you do see the unemployment rate move at these levels then history will tell you that wages should rise over time," Kennedy added.

A poll of 39 analysts had found all but one expected cash rates to be left unchanged this week, with an increase not expected before early 2020.

Financial markets have steadily pushed out the likely timing of a move, with the most distant futures contract for April 2020 pricing in about 80 percent change of tightening.

The domestic case for a hike has also been weakened by a sharp slowdown in the once red-hot housing market in and

Values in Sydney, the country's largest city, clocked their worst annual performance since 1990 in October, led by a regulatory clamp-down on investment loans and tighter lending standards by banks.

So far, Lowe hasn't displayed any unease over this downtrend, saying there is still "strong competition for borrowers of high credit quality."

He remained upbeat about the A$1.8 trillion economy and said in recent comments that the next move in rates is likely to be up rather than down.

On Tuesday, he said economic growth is expected to average around 3.5 percent over the next two years before easing in 2020 due to a slowing of resources exports.

(Addditional reporting by Karishma Luthria in SYDNEY; Editing by Sam Holmes)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, November 06 2018. 10:53 IST
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