SYDNEY”•Australia’s central bank kept interest rates at a record low Tuesday 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 1.50 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,” Lowe said in a statement after the monthly 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 US cents, after the statement was released.
It also reflected 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 one percent year-on-year in April-June, a 17-year low, far below the Reserve Bank’s target of 2.0-3.0 percent.
The next CPI (consumer price index) data will be released in late October.
“This was always going to be an interesting meeting as it’s Phil Lowe’s first as the RBA governor,” JP Morgan economist Tom Kennedy told AFP.
“The fact that the board has delivered a statement that is pretty close to what they’ve delivered in the previous six months when they haven’t cut… suggests the message they want to convey is one of consistency and that the way monetary policy will be managed going forward is not going to be significantly different.”
Lowe highlighted elements of softness in the labor market despite the unemployment rate falling to 5.6 percent, its lowest level in almost three years, in August.