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Australia's Reserve Bank keeps interest rates on hold, remains 1.5 percent

Xinhua, May 2, 2017 Adjust font size:

The Reserve Bank of Australia (RBA) on Tuesday announced it will keep the cash rate on hold, sticking to the current rate of 1.5 percent.

In Tuesday's announcement, Philip Lowe, governor of the Reserve Bank, stated that as headline inflation during the March quarter remained within the target range of 2 to 3 percent, no movement on interest rates was necessary.

"Inflation picked up to above 2 percent in the March quarter in line with the Bank's expectations. In underlying terms, inflation is running at around 1.75 percent, a little higher than last year. A gradual further increase in underlying inflation is expected as the economy strengthens," Lowe said.

"The Bank's forecasts for the Australian economy are little changed. Growth is expected to increase gradually over the next couple of years to a little above 3 percent."

One of Australia's leading economists, Phil Dales of Capital Economics, told Xinhua in a statement on Tuesday, the Reserve Bank will struggle to be in a position to raise rates before 2019, and also, may need to explore other measures.

"There is still a risk that a further deterioration in the labor market prompts the RBA to cut interest rates this year," Dales said.

"It looks as though interest rates will remain on hold at 1.5 percent for the rest of this year as financial stability concerns continue to force the RBA to put up with underlying inflation remaining below the 2 to 3 percent target range and an unemployment rate of close to 6 percent."

In the RBA announcement, Lowe also mentioned the regulatory steps that have been taken in terms of property lending growth which have made an impact to ease concerns about household debt, but HIA economist Geordan Murray has called for regulators to take caution in their actions.

"The housing cycle is passed its peak. Whether it be APRA's guidance on lending standards, reform of planning policies, state or commonwealth taxation and expenditure measures, or monetary policy, our policy makers must proceed with care." Murray said. Endit