New central bank governor holds interest rates
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. –
The Reserve Bank of Australia in Sydney.