From the FXWW Chatroom: As expected, the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 1.50% today. Interest rates have now remained unchanged for 21 consecutive policy meetings. Once again, the central bank did not make any changes to its policy guidance in today’s statement. The RBA reiterated that it expects GDP growth to be above 3% growth in 2018-19, noting the strong growth in Q1, but it continues to flag that low inflation and weak wage growth will continue to weigh on policy decisions.
In its statement today, the RBA took note of the continuing global expansion, but also flagged emerging uncertainty from the direction of trade policy in the US and country-specific stress points in several emerging markets that could weigh on the global recovery. The RBA sees current financial conditions as expansionary, but turning less so, given stronger USD and rising short-term rates. On the domestic front, the central bank noted that incoming data remain consistent with RBA’s projections and flagged that the outlook for labour market remains positive, as forward-looking indicators point to strong job growth and a modest decline in unemployment rates. Wage growth remains low in RBA’s assessment, but it noted increasing signs of skills shortages in some sectors, a development that could push up wages. The next key data on this front will be inflation for Q2 2018, released on 25 July 2018.
The RBA turned slightly more cautious on the housing market, noting the recent decline in investor-only loans demand and prices. However it also said that lending standards may tighten further, but it may have little implications for mortgage rates in the near term.
RBA to remain on hold in 2018; market pricing out rate hikes for foreseeable future