(Australian Associated Press)
The Reserve Bank has left the cash rate unchanged at a record low 1.0 per cent as it maintains its wait and see approach to June and July’s cuts.
The decision at Tuesday’s monthly board meeting was widely expected by economists after the RBA repeatedly signalled it wanted to see whether its twin 0.25 percentage point cuts had been enough to stimulate economic growth.
Expectations of another cut before the end of this year have been growing, however, after dismal construction, retail and import data.
In his statement, RBA governor Philip Lowe repeated the board’s view that a prolonged period of low rates was on the cards and indicated that further cuts remained on the table.
“The board will continue to monitor developments, including in the labour market, and ease monetary policy further if needed to support sustainable growth,” Dr Lowe said.
A cut to 0.75 per cent is already fully priced in for November, with a reduction to 0.5 per cent expected by April.
Canstar finance expert Steve Mickenbecker said it was not surprising the central bank kept its limited powder dry this month, particularly as the trade war between China and the US escalates.
Callam Pickering, APAC economist at jobs site Indeed, also said it was typical of the Reserve Bank to take a few months to assess how the economy responds to a rate move.
“Whether that is wise in these circumstances, with economic growth terrible and most indicators underperforming, is open for debate,” Mr Pickering said.
Improved property prices remain an outlier amid a sea of poor data releases, which reflect a housing construction downturn, weak retail trade, poor inflation and wages growth, and an unemployment rate that looks more likely to tick upwards instead of down.
BIS Oxford Economics chief economist Sarah Hunter said she expected to see further easing this year and again in early 2020 to support employment and wages growth.
CommSec senior economist Ryan Felsman said there appeared to be little reason to delay pulling the interest rate lever “given the (RBA) has recently modelled its downgraded economic growth, jobless and inflation forecasts on two rate cuts”.
The Australian dollar spiked from 66.94 to 67.10 US cents after the decision and was worth 67.14 US cents by 1520 AEST.