New cen­tral bank gover­nor holds in­ter­est rates

The Myanmar Times - - Business -

AUS­TRALIA’S cen­tral bank kept in­ter­est rates at a record low yes­ter­day in the first meet­ing for newly minted chief Philip Lowe, amid solid do­mes­tic growth and signs that com­mod­ity prices have passed their trough.

Aus­tralian growth has re­mained ro­bust de­spite the econ­omy’s un­even tran­si­tion away from min­ing-driven ex­pan­sion, but a re­cent run of slug­gish in­fla­tion fig­ures drove the Re­serve Bank of Aus­tralia to cut rates in May, and then again in Au­gust to 1.5 per­cent.

“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,” Mr Lowe said af­ter the RBA board meet­ing.

The de­ci­sion to sit on the side­lines was widely tipped by econ­o­mists, and the Aus­tralian dol­lar drifted slightly lower to 76.67 US cents, from 76.76, af­ter the statement was re­leased.

It also re­flected Mr Lowe’s com­ments to a par­lia­men­tary hear­ing last month, where he struck a cau­tious note about fur­ther cuts to rates and added that the cen­tral bank was not “nut­ters” about keep­ing in­fla­tion in a tight range.

Aus­tralia, like other economies, is bat­tling low in­fla­tion amid weak wages growth, sub­dued oil prices and tepid global trade.

In­fla­tion rose by just 1pc yearon-year in April-June, a 17-year low, far be­low the Re­serve Bank’s tar­get of 2-3pc.

The next CPI (con­sumer price in­dex) data will be re­leased in late Oc­to­ber.

Mr Lowe high­lighted el­e­ments of soft­ness in the labour mar­ket de­spite the un­em­ploy­ment rate fall­ing to 5.6pc, its low­est level in al­most three years, in Au­gust.

The Aus­tralian dol­lar has risen in re­cent months along­side a re­bound in com­mod­ity prices af­ter sharp falls, but Mr Lowe warned that an ap­pre­ci­at­ing ex­change rate could put pres­sure on growth in non-re­sources sec­tors as the econ­omy re­bal­ances.

Even so, the im­prove­ment in com­mod­ity prices – in­clud­ing of Aus­tralia’s largest ex­port iron ore – has shored up the econ­omy and could boost gov­ern­ment rev­enue as Can­berra seeks to rein in its bud­get deficit. –

Photo: AFP

The Re­serve Bank of Aus­tralia in Sydney.

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