RBA keeps 1% cash rate

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The Reserve Bank of Australia (RBA) left the official cash rate at 1%, following its August monetary policy meeting.

The market has already anticipated the decision, after the central bank made a 0.5% cumulative cut in June and July, according to ABC.

Observers claimed RBA would monitor the impact of its cuts and the recent fiscal and regulatory stimulus before considering a further rate reduction, a report from The Adviser said.

The central bank’s June and July cuts have already helped stimulate demand in the housing market, according to CoreLogic head of research Tim Lawless.

“The housing market has been a key beneficiary of lower mortgage rates, with a trend towards stability over the first half of the year converting to a subtle rise in capital city housing values in July,” Lawless said.

However, analysts expect  at least another rate cut before the year ends, saying the June and July cuts would be inadequate to help the central bank achieve its employment and inflation target, according to The Adviser report.

“We doubt that the policy easing seen so far will be enough to get unemployment below 4.5% and wages growth and inflation up to (the) target and so expect the RBA to resume cutting later this year with 0.25 per cent cuts in November and February,” said AMP Capital chief economist Shane Oliver.

The recent global economic developments could elicit more easing from RBA than expected, according to Francesco Pesole, ING Economics’’ FX strategist.

“Looking ahead, headline inflation still appears far from the (ambitious) 2.5% RBA mid-point target, which—in line with (RBA Governor Philip Lowe’s) recent rhetoric—make us believe that another cut may be delivered by the end of this year,” Pesole said.

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