SYDNEY: Australia’s central bank left interest rates unchanged Tuesday and stuck to a neutral tone on policy despite recent signs of improvement in the economy and a swing toward more hawkish guidance among its global counterparts. The decision by the Reserve Bank of Australia to keep its cash rate at a record low 1.5% had been widely expected by economists as the bank maintains its focus on benign inflation, weak wage growth and a slack job market. The cash rate has remained unchanged since August last year.
In an accompanying statement, RBA Governor Philip Lowe said job market indicators remain mixed, though employment growth has been stronger over recent months. Wage growth remains low, he said, and this “is likely to continue for a while yet.” Gov. Lowe indicated earlier this year he would be reluctant to lower interest rates, fearing it would stoke a further surge in house prices. Recent signs of improvement in the labor market and sentiment among households and businesses have largely dispelled lingering expectations of a possible rate cut. Still, with domestic consumption only starting to show signs of improvement and household debt at record levels, any rate increases still seem some way off in the distance. Ahead of the policy meeting, financial markets had priced in little or no chance of a change in interest rates until mid-2018. The neutral tone of the RBA contrasts with an apparent shift at the Bank of England, the Bank of Canada and the European Central Bank toward a possible tightening of policy settings. The U.S. Federal Reserve also remains hawkish after raising interest rates last month, while global growth indicators continue to strengthen.
