RBA keeps interest rate unchanged

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The Reserve Bank of Australia decided to keep rates at 1.50% in its May monetary policy meeting.

The central bank hinted on future cuts once the unemployment rate does not track downward. “[The RBA board] recognized that there was still spare capacity in the economy and that a further improvement in the labor market was likely to be needed for inflation to be consistent with the target,” RBA said in a statement.  “Given this assessment, the board will be paying close attention to developments in the labor market at its upcoming meetings.”

Calls from some analysts for the RBA to ease policy at its May meeting heightened after first-quarter inflation hit below expectations. The result falls short the central bank’s 2-3% target for 13 straight quarters, according to Reuters.

Most economists said the statement had an “implicit” bias on decreases with the RBA still seemingly broadly confident about the economy despite the recent discouraging data.

“The central scenario is for the Australian economy to grow by around 2¾ per cent in 2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in activity in the resources sector, partly in response to an increase in the prices of Australia's exports. The main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices. Some pick-up in growth in household disposable income is expected and this should support consumption,” RBA said in a statement.

 

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