Australia Monetary Policy December 2016

Australia

Australia: RBA keeps interest rate unchanged at December meeting

December 6, 2016

At its 6 December monetary policy meeting, the Reserve Bank of Australia (RBA) kept its policy rate steady at an all-time low of 1.50% after cutting the rate by 25 basis points twice this year, once in May and once in August. The decision met market expectations and came against a backdrop of low inflation, slow wage growth and a slowing growth outlook overall for the Australian economy.



In its accompanying statement, the RBA noted that Australia’s slowing pace of growth was driven by subdued business investment, but this is expected to improve moving forward thanks to above average business confidence. Inflation remains subdued and is expected to remain weak due to slow growth of labor costs and a lack of global inflationary pressures. The RBA also noted disparities in some real estate markets, with some areas experiencing steep price increases and some others facing an oversupply of housing thereby dampening price growth.



Against this backdrop, the Board judged that, “holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

FocusEconomics Consensus Forecast panelists expect the cash rate to end 2017 at 1.36%, up 0.04 percentage points from last month’s forecast. Our panelists see it falling to an average of 1.64% by the end of 2018, which is down 0.09 percentage points from last month’s estimate.


Author:, Economist

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Australia Monetary Policy December 2016

Note: RBA Cash Rate in %.
Source: Reserve Bank of Australia (RBA).


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