‘This is very clearly a message from a central bank that does not want to cut interest rates any further’. – Paul Bloxham, HSBC
As markets expected, Australia’s Central bank left its key interest rates unchanged at a record low of 1.5% at the end of its monetary policy meeting on Tuesday and signaled it would keep the rates on hold for a considerable period. According to the Reserve Bank of Australia’s latest forecasts, the economy is expected to expand at an annualized pace of 3% over the next several years, while inflation is likely to rise above the Central bank’s 2% inflationary target already this year. In the final quarter of 2017, Australian inflation rose 1.5% year-over-year, missing forecasts and staying below the RBA’s 2% target. Since the world’s major central banks are unlikely to ease their monetary policies in the near term, analysts suggest that the RBA would follow the exact same pattern. Moreover, some analysts say that the Central bank is likely to keep its interest rates steady until 2018. After the release, the Aussie rose against other major currencies, climbing against the Greenback from 0.7637 ahead of the release to 0.7675. Tuesday’s statement also pointed to the inconsistent housing market trends, saying that while some regions see sharp increases in prices, others experience subdued price growth. A report released by CoreLogic last week showed prices in capital advanced 10.7% in 2016 after climbing 7.4% in the preceding year.