Australia’s central bank decided to maintain its record low interest rate, as widely expected, and policymakers were less upbeat about near-term growth outlook.
The board of the Reserve Bank of Australia, governed by Philip Lowe, maintained the cash rate at 1.50 percent. The bank had reduced the rate by 25-basis points each in August and May last year.
“Taking account of the available information, 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.
The bank noted that the low level of interest rates is continuing to support the Australian economy.
“The rate of wage growth appears to have troughed,” the bank noted. Inflation is forecast to remain low for some time, reflecting low growth in labor costs and strong competition in retailing. Nonetheless, a gradual pick-up in inflation is expected as the economy strengthens.
Market volatility has increased from the very low levels of last year. A number of central banks have withdrawn some monetary stimulus as condition improved in the global economy, the bank observed.
An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast, RBA said.
The bank said the central forecast is for the Australian economy to grow faster in 2018 than it did in 2017. Last month, the bank had forecast growth to average a bit above 3 percent.
The Australian Bureau of Statistics is slated to publish its quarterly national accounts data on Wednesday. Economists expect the economy to grow 2.5 percent on year in the fourth quarter, slower than the 2.8 percent expansion seen in the third quarter.
Bill Evans, an economist at Westpac said the Reserve Bank appears to be less confident about the growth outlook. Nevertheless, the rate is likely to be raised beginning sometime in late 2018 and into 2019.