Rates on hold but US fears loom

AUSTRALIA’S great rate freeze has stretched into a 20th month — the longest period without a change in the modern era of the Reserve Bank.

Governor Philip Lowe yesterday announced the cash rate would stay on hold for at least another month as the central bank balanced a broadly positive economic outlook with weak wage growth and high household debt levels.

And the cash rate was unlikely to change for many months yet, economists said, as the central bank closely watched developments in the global economy.

Confirming that the cash rate would remain at 1.5 per cent yesterday, Dr Lowe noted the widespread concerns over US trade policy.

“Equity market volatility has increased from the very low levels of last year, partly because of concerns about the direction of international trade policy in the United States,” he said.

China this week inked a series of new taxes on US imports in response to a move by US President Donald Trump to levy tariffs of 25 per cent on steel and 15 per cent on aluminium.

At 20 months, the freeze in the cash rate is the longest since the RBA started its monthly review almost 30 years ago.

Westpac chief economist Bill Evans noted Dr Lowe had cited a central forecast for “faster growth” in the economy than the 2.4 per cent rate of expansion last year.

As a result, it was “reasonable to assume” that the RBA, in growth forecasts due next month, would trim its more-bullish projection for this year.

Westpac saw “no reason” to change its view that the cash rate would remain unchanged this year and next, he said.