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RBA sees no reason to lift rates right now

RBA sees no reason to lift rates right now

The Reserve Bank doesn’t feel under any pressure to change the cash rate, according to the minutes of its last monetary policy meeting.

The Reserve Bank decided at its monthly meeting, on July 5, to leave the cash rate at a record-low 1.50 per cent, after weighing up domestic and international conditions.

The low level of interest rates was continuing to support the Australian economy,” the board concluded, according to the newly released minutes from the meeting.

“Further progress in the period ahead in reducing unemployment and returning inflation to the target was therefore expected, although this progress was likely to be gradual.

“In the current circumstances and taking account of the available information, the board judged that holding the stance of monetary policy unchanged would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

Good news outweighs the bad

Reserve Bank board members felt that domestic economic conditions have improved. Some of their observations included:

  • Economic growth will climb above 3 per cent by the end of 2018
  • Inflation will gradually increase above 2 per cent as the economy strengthens and wages growth increases
  • Business conditions are at their strongest levels since the start of the GFC
  • Mining investment is expected to fall over the next few quarters
  • Non-mining investment continues to grow
  • Property prices are falling in Sydney and Melbourne

Board members also had a largely positive view of international economic conditions. Their observations included:

  • Unemployment in the US, Japan and Germany is at its lowest in several decades
  • China’s economic growth has increased
  • India’s economic growth has increased
  • A possible trade war, instigated by the US, would harm the global economy
  • Political instability in Italy is concerning

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.



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