Cash Rate remains on hold for September 2017
As widely expected, the Reserve Bank of Australia has again kept the official cash rate on hold at 1.5 per cent. This marks the twelfth month in a row that the RBA has left the cash rate unchanged, with the last movement a 25 basis point rate cut in August 2016.
Today’s decision was correctly predicted by researchers and economists alike who widely predicted that the rate would remain on hold in August 2016 and further note that any rate movements in the immediate future are deemed as unlikely.
RBA Governor Philip Lowe has remained optimistic in his monetary policy statement that accompanied today’s decision, saying that “the low level of interest rates continues to support the economy”.
In an increasingly familiar commentary, the bank provided a largely optimistic outlook on current economic conditions “with recent data consistent with the RBA’s expectation that growth in the Australian economy will gradually pick up over the coming year”.
Dr Lowe once again acknowledged the strong Australian Dollar that is keeping inflation below the targeted range of 2-3 per cent and “weighing on the outlook for output and employment”.
It was also noted that retail sales have recently picked up, “although slow growth in real wages and high levels of household debt are likely to constrain future growth in spending."
In contrast to last month’s statement, Dr Lowe is now indicating that the construction boom looks to have peaked, saying “residential construction activity remains at a high level, but little further growth is expected”.
Another key point in the Governor’s statement is the indication that housing prices are starting to ease, particularly in Sydney. “Housing prices have been rising briskly in some markets, although there are signs that conditions are easing, especially in Sydney. In some other markets, prices are declining”.
Further clarification of the RBA’s outlook is expected with tomorrow’s GDP data, which is widely expected to show the economy is growing marginally slower than forecasted.
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