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AUSTRALIA-ECONOMY-RATE
Australia’s central bank holds rates, analysts tip future cut
SYDNEY, April 2, 2019 (BSS/AFP) – Australia’s central bank on Tuesday kept
interest rates at a record low but said it would monitor developments as the
economy stutters, with observers tipping a cut this year.
The economy grew just 0.2 percent in the last three months of 2018 to take
the annual rate of expansion to 2.3 percent, below the Reverve Bank of
Australia’s forecasts.
Inflation is sitting at 1.8 percent, which is also outside the central
bank’s target range of 2.0-3.0 percent.
RBA governor Philip Lowe acknowledged weakness in both sets of economic
data but said he was encouraged by the strength of the jobs market.
“The stronger labour market has led to some pick-up in wages growth, which
is a welcome development,” he said in a statement after a monthly board
meeting, which saw the bank keep rates at 1.5 percent, where they have been
since August 2016.
“Continued improvement in the labour market is expected to see some further
lift in wages growth over time, although this is still expected to be a
gradual process.”
However slowing economic growth — with house prices tumbling, inflation
and wages growth remaining soft and high household debt — has seen
economists start to price in up to two quarter-point cuts this year.
JP Morgan economist Tom Kennedy said Lowe’s decision to add the phrase
“continue to monitor developments” in the closely watched final (paragraph)
of his statement suggested it was open to cuts.
“Given how the data has unfolded generally globally, that phrase would
suggest that they are looking at developments, and… the read-through is
that they have to lower rates if things sour from here,” Kennedy told AFP.
“The market is taking that as a sign that the RBA is laying the groundwork
to ease or adjust policy.”
The decision came just hours before the government hands down its annual
budget announcement, in which tax cuts are tipped to be doled out to voters
ahead of an expected national election in May.
Commonwealth Bank of Australia chief Michael Blythe said fiscal policy,
such as tax cuts, could help tackle the downside consumer risks.
The Australian dollar was down 0.5 percent at US$0.7080 in afternoon trade.
BSS/AFP/GMR/1143 hrs