RBA holds rates, but could cut next month

(Australian Associated Press)

The Reserve Bank has held interest rates steady, but it could cut next month to boost sluggish inflation.

The RBA opted to leave the cash rate at a record low of 1.50 per cent at its October board meeting on Tuesday.

New RBA governor Philip Lowe’s first statement on interest rates didn’t go smoothly as the central bank’s own website failed to load it for a full two minutes.

Dr Lowe eventually just repeated the exact line used by his predecessor Glen Stevens in his September interest rates statement.

“Having eased monetary policy at its May and August meetings, the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time,” he said.

Dr Lowe said the pace of economic growth was “moderate”, but he also noted many risks including an uncertain global economy, moderation in household consumption, house prices in some markets “strengthening” and subdued growth in full time work.

Citi economists said the RBA board was waiting to assess the impacts of its two earlier rate cuts on low inflation before moving again.

“At this early stage there’s little evidence of a strong response to the easings, hence the somewhat downbeat commentary in the statement consistent with an easing bias,” they said in a note.

However, AMP Capital chief economist Shane Oliver said competitive pressures globally, weak domestic wage growth and the high Australian dollar were putting pressure on inflation and increasing the chances of a November rate cut.

“This is a close call and is critically dependent on seeing a lower than expected September quarter inflation result,” he said in a note.

“Either way a cut in the cash rate to one per cent or below and the adoption of quantitative easing remains very unlikely in Australia.”

 

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