The Reserve Bank of Australia Leaves Cash Rate Unchanged

reserve bank of australia

The Reserve Bank of Australia took the expected decision to keep the cash rate at an unaltered value for the time being. This Tuesday the status quo reached its ninth straight month. Through this decision, economists seek to counterbalance the chance of a climax of debt-fuelled property with wages growth and a tamed inflation.

RBA Delivered the Unchanged Cash Rate News on a Pessimistic Note Regarding Wage Growth

As a consequence, The Reserve Bank of Australia (RBA) is in its ninth month since it kept cash rate as low as 1.5%. This situation was obtained last August and May due to an economic amelioration. Nonetheless, this event is a scenario that specialists were ready for.

RBA gave a statement regarding the unchanged cash rate and accompanied it with an optimistic note regarding the country’s economic growth. On the other hand, the message delivered a foreboding implication as officials are counting on wages growth to keep a slow evolution for a longer time.

On the other hand, the statement was met with some indignation from several specialists. Michael Blythe, who works at Commonwealth Bank of Australia as an economist, criticized RBA’s vision. He stated that the Reserve Bank doesn’t support wages as much as they should.

“That’s the most pessimistic view on wages that we’ve seen from the RBA in a while.”

Inflation Pressures Hinder Regulators from Elevating Interest Rates

The consumer price inflation in Australia reached 2% last quarter. This was the most effervescent development this sector saw since the year of 2015. On the other hand, those measures that received the most support from RBA such as underlying inflation managed to remain below their target of 2 to 3%.

RBA Governor Lowe claimed that the labor market is represented at the moment by a miscellaneous landscape. Despite this mixed material, certain indicators are still pinpointing at a growing employment. Last month, reports revealed that the jobless rate was 5.9% in March. As such, this signals that employment gained the most momentum in the last two years and managed to exceed expectations.

On the other hand, excessive home prices are overshadowing these recent achievements. Melbourne and Sydney are the hottest cities at this chapter so far. To solve this issue, regulators intended at the beginning of the year to keep lending away from speculative investors. However, in light of recent RBA statement, a rate hike seems to be an impossible move for the time being.

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