Australia central bank keeps rates at record low

SYDNEY:

Australia’s central bank held interest rates at a record low Tuesday, as it warned that a strengthening local currency was hurting activity in an already soft domestic economy.

The Reserve Bank of Australia has held rates at 1.50 percent for a year, after cutting them by 300 basis points since late 2011 to boost an economy transitioning away from a dependence on mining following an unprecedented investment boom.

“The board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and

A sold sign on a real estate board advertising residential property is seen in front of a house in Sydney on August 1, 2017. Australia’s central bank held interest rates at a record low on August 1, as it warned that a strengthening local currency was hurting activity in an already soft domestic economy. in a slower pick-up in economic activity and inflation than currently forecast.”

The stronger language failed to move the currency, with the Australian dollar little changed at about 80 US cents. The local unit was trading around 76.4 US cents when the RBA released its last rate decision in early July.

“We did indeed get some fairly rency comments after 15 meetings.

“When a central bank tells you that an appreciating exchange rate could be expected to result in a slower pick-up in economic activ- think, ‘ What are their forecasts?’”

The RBA will release its latest economic forecasts Friday, with Rennie expecting a possible modest downgrade to the current outlook of annual growth increasing to a little over three percent.

The central bank is having to balance a booming housing market that favours a rate hike against an uncertain consumption outlook, which supports a cut.

Commonwealth Bank of Australia’s chief economist Michael Blythe said the prospect of a hike was “unlikely before late 2018”.

“The RBA last pulled the policy lever in August 2016 -- a year ago. We suspect another year of masterly inactivity is in store from here,” Blythe said in a note.