Central bank leaves rates at 1.5%

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Australians saw economists’ forecast coming to life as The Reserve Bank of Australia (RBA) kept the cash rate at 1.5% on Tuesday. This announcement came as the dollar hit the lowest point it’s seen in over a year.

Bloomberg reported that the central bank will not lift rates until the labour market is capable enough to boost wages and inflation.

“One uncertainty regarding the global outlook stems from the direction of international trade policy in the United States,” RBA Governor Philip Lowe said in a disclosure. “There have also been strains in a few emerging market economies, largely for country-specific reasons.”

It is no secret that Australia’s economy is largely dependent on China. As such, the rising trade war between China and U.S, which has been known for its rosy economy, will undoubtedly have an impact on Australians.

Another concern haunting the financial sector is the increasing cost of credit due to higher rates that banks have to pay in order to borrow from each other.  “Th[is] impact could make an unwanted dent in consumer spending,” Bloomberg explained.

Additionally, tighter lending conditions from the banks have resulted in a slowdown in credit growth – these measures were instituted to manage risks and help regulators.

“In Australia, short-term wholesale interest rates have increased over recent months,” Lowe said. “This is partly due to developments in the United States, but there are other factors at work as well. It remains to be seen the extent to which these factors persist.”

The dollar falling can be added to this list of worries, but  Lowe assured Australians that the drop is within control.

“The Australian dollar has depreciated a little, but remains within the range that it has been in over the past two years,” he said.

Australia’s economy is currently riding on a 27-year rcession free record, thanks to the strong growth of export volumes to China in recent years.

 

Related stories:
Analysts Anticipate Record Low Cash Rates Until 2019
Property Market: A Slowly Deflating Bubble

 

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