The Reserve Bank of Australia (RBA) has decided to keep Australia’s official cash rate on hold at an historical low of 2.5 per cent for its eleventh straight meeting .
Economists had unanimously tipped the RBA would maintain the cash rate steady after last month forecasting a period of stability in interest rates and citing a loss of consumer confidence around the budget.
In its July statement, the RBA said long term interest rates and risk spread remain low and volatility in financial prices is unusually low. Emerging markets are receiving capital inflows and markets in general seem to be attaching a low probability to any immediate rise in global interest rates.
Across the housing sector the RBA says a strong expansion in housing construction is now underway and dwelling prices have increased significantly over the past year and are now showing signs of moderation in the pace of increase. Moderate growth has been occurring in consumer demand. Growth is still expected to be a little below trend over the year ahead.
The RBA also noted improvement in indicators for the labour market in recent months but says it will be some time before unemployment declines consistently. Growth in wages has declined noticeably.
The exchange rate remains historically high, particularly given the declines in key commodity prices.
Looking ahead the central bank says continued accommodative monetary policy should provide support to demand, and, help growth to strengthen over time. Inflation is expected to be consistent with the 2-3 per cent target over the next two years.
