Finance Finance News RBA shrugs off weak inflation to keep rates on hold at 1.5%

RBA shrugs off weak inflation to keep rates on hold at 1.5%

Rates have stayed on hold. Photo: AAP
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Falling house prices and continued low inflation have not altered the Reserve Bank’s determination to keep its current interest rate settings.

The RBA kept its official cash rate on hold at 1.5 per cent at its Cup Day meeting.

That keeps rates at a record low and extends to 25 the record number of meetings without a change.

Despite another weak quarterly inflation reading last week – stretching the period core CPI has been under the RBA’s target band to almost three years – the decision was widely expected.

Money markets priced in no chance of a change leading up to the decision.

On the flip side of weak inflation and falling house prices, the jobs market remains strong with the unemployment rate falling to 5 per cent, the lowest level since early 2012, and the economy is growing in line with the RBA’s forecasts.

The RBA retained an upbeat stance in its post decision statement noting: “Forecasts for economic growth in 2018 and 2019 have been revised up a little.”

“The central scenario is for GDP growth to average around 3.5 per cent over these two years, before slowing in 2020 due to slower growth in exports of resources,” RBA governor Philip Lowe said.

“Business conditions are positive and non-mining business investment is expected to increase.”

However, Dr Lowe said the outlook for household consumption was one continuing area of uncertainty.

“Growth in household income remains low, debt levels are high and some asset prices have declined. The drought has led to difficult conditions in parts of the farm sector.”