Australia's Central Bank Leaves Interest Rates Unchanged
- Author: Zachary Reyes Jun 06, 2017,
Jun 06, 2017, 9:59
The Reserve Bank of Australia has left its benchmark interest rate on hold at 1.5 percent for a 10th consecutive month.
"Wages growth remains low and this is likely to continue for a while yet".
A big unknown is household consumption which surprised with its strength late in 2016, but is being burdened by record-low wage growth and high levels of mortgage debt.
The Australian dollar climbed following the announcement, rising to 74.88 USA cents by 1514 AEST, having earlier fallen to a low of 74.57 U.S. cents on weaker than expected national exports data.
While much of the market commentary in recent months has pointed toward an upward trajectory for the official cash rate, there are growing signs that the RBA's easing cycle may not be over.
The outcome could weigh on gross domestic product growth due on Wednesday.
"Year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variation in the growth figures", he said. "Inflation is expected to increase gradually as the economy strengthens", he added. Nonetheless, RBA expects economic growth to increase gradually over the next couple of years to a little above 3 percent.
"The 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", the bank said in a statement.
"If anything, economic performance and risks still suggest there should be an easing bias and property markets/debt accumulation suggest a tightening one", Mr Joiner said.
The RBA will hold its next Board meeting July 4. Employment growth has been stronger over recent months, although growth in total hours worked remains weak.
The long-awaited cooling of east coast house prices may also be starting to feed through. Price growth has been especially dramatic in capital cities, with Sydney and Melbourne registering double-digit percentage growth on a year-over-year basis. The median forecast from a Reuters poll predicts growth of 0.2 per cent in the first quarter from the previous period, with some analysts seeing a small contraction. Still, the RBA may be willing to look past a soft performance in the early part of 2017, mindful of some temporary weather-related factors.