Australia: RBA keeps interest rate unchanged at October meeting
October 4, 2016
At its 4 October monetary policy meeting, the Reserve Bank of Australia (RBA) kept its policy rate steady at an all-time low of 1.50% after cutting its 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 moderate growth outlook overall for the Australian economy. It marked Philip Lowe’s first monetary policy meeting as RBA governor since he took over from a retiring Glenn Stevens on 18 September.
In its accompanying statement, the RBA noted that Australia’s moderate pace of growth was underpinned by functioning financial markets, gradually recovering commodity prices—which has caused the decline in mining investment to slow—and robust consumer and business sentiment. Inflation remains subdued and is expected to remain weak due to low labor costs and global inflationary pressures.
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.”
Author: Christopher Mc Innes, Economist