RBA holds cash rate at 1.5%

Peter Trute
(Australian Associated Press)


The Reserve Bank has left the cash rate unchanged at 1.5 per cent for the 24th month in a row, with RBA governor Philip Lowe adding the drought affecting large parts of the country to his list of concerns.

Dr Lowe said weak household spending remained a source of uncertainty for the economy and a factor in the RBA board’s decision to leave the official interest rate at its current record low,

The RBA boss also mentioned the drought that is currently affecting eastern Australia, saying it has “led to difficult conditions in parts of the farm sector”.

Dr Lowe also said the annual inflation rate is now expected to be 1.75 per cent – outside the RBA’s preferred two to three per cent target band – as a result of one-off declines in some prices in the September quarter.

Currently headline inflation is running at 2.1 per cent over the past year, he said, and the forecast is for inflation to be higher in 2019 and 2020 than it is at present.

The bank chief also said conditions in the nation’s two largest housing markets – Sydney and Melbourne – continue to ease as investors drop away.

Home loan volumes are also declining – in part due to fewer investors and also due to higher lending standards.

On the global front, Dr Lowe said the trade stance of the United States – which has recently imposed significant tariffs on imports from trading partners, sparking retaliation – remains a source of uncertainty.

The Australian dollar showed little reaction to the widely expected rates decision and was trading at 73.93 US cents at 1449 AEST – from 73.95 US cents on Monday.

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