Australia’s central bank held rates steady for a 9th consecutive month in a widely expected decision as it sought to balance the risk of busting a debt-fuelled property bubble against subdued inflation and wages growth. The Reserve Bank of Australia kept rates at a record low 1.5%, following easings in August and May last year.
The RBA sounded optimistic about economic growth, but added a new line in its statement warning wages growth was expected to remain slow “for a while yet”. The decision to stand pat comes amid continued concerns around a possibly overheated property market, although those worries were tempered marginally yesterday as house price growth slowed markedly in April.
The sudden slowdown in valuation advances came on the heels of tighter lending standards for housing investors and rising rates for that previously booming segment of the market. In a statement today, the central bank detailed an unchanged view on the housing market as it again noted prices rising “briskly” in some east coast markets and declining in others, namely Perth. The RBA has been forced to balance the risk of further stimulating the housing market against a desire to boost inflation from historically low levels.
The market’s view on interest rates in Australia hasn’t changed after today’s meeting. The RBA is expected to keep rates steady in upcoming months. source: Bloomberg
More broadly, the RBA was upbeat on the Australian economy, seeing no reason to significantly alter its views as it prepares to release its latest forecasts on Friday. The central bank also noted the weight from the end of the mining investment boom was finally near an end.
The AUDUSD denied a breakout below the crucial support, but remains within a downward channel.