RBA hold rates at 2% but low inflations expectations remain
The cash rate remaining at 2% was of no surprise. However RBA suggest a rate cut is on the table if low inflation persists (whilst their own expectation is it to remaon low for the next one to two years).
At its meeting today, the Board decided to leave the cash rate unchanged at 2.0 per cent.
- Global economy growing at slightly lower pace than expected
- Conditions more difficult for emerging economies
- China's growth has continued to moderate
- Financial markets have once again exhibited heightened volatility recently
- Appetite for risk has diminished somewhat
- Funding conditions for emerging market sovereigns and lesser-rated corporates have tightened.
- Monetary policy remains remarkably accommodative.
- Expansion in the non-mining parts of the economy strengthened during 2015
- Business conditions are above average levels, employment growth has picked up and unemployment has declined.
- Inflation continues to be quite low, with the CPI rising by 1.7 per cent over 2015.
- CPI likely to remain low over the next year or two
Effects of Monetary Policy:
- Appropriate for monetary policy to be accommodative
- Low interest are supporting demand
- Regulatory measures are curbing house prices via tightened lending standards
- Exchange rate has continued its adjustment to the evolving economic outlook
- The board judged there were reasonable prospects for continued growth in the economy, with inflation close to target.
- Current monetary policy remained appropriate.
- New information should allow [the board] to judge whether improvements in labour market continues and whether recent financial turbulence portends weaker global and domestic growth.
- Continued low inflation could provide scope for further easing, should this be deemed appropriate to support demand