02/04/2019 - 11:57

RBA holds cash rate at 1.5% yet again

02/04/2019 - 11:57

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The Reserve Bank of Australia has kept the official cash rate at a record low of 1.5 per cent as widely expected, but most economists believe a rate cut is around the corner.

Interest rates were last cut in August 2016 and haven't been hiked since November 2010

The Reserve Bank of Australia has kept the official cash rate at a record low of 1.5 per cent as widely expected.

The decision at Tuesday's April board meeting means the cash rate has not moved in 32 months.

RBA governor Philip Lowe said higher levels of public infrastructure spending, an upswing in private investment and a strong labour market had offset the impact of the drought on farm output and weak household consumption amid declining property prices. 

"The low level of interest rates is continuing to support the Australian economy," Dr Lowe said in his statement.

"Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual."

The rate, which reflects what the central bank charges commercial banks on overnight loans and influences all other interest rates, was last cut in August 2016 and hasn't been hiked since November 2010.

The Australian dollar was unmoved by the decision at 71.07 US cents.

AMP Capital chief economist Shane Oliver said the the RBA underestimated the impact of the housing downturn on the economy in their assessment, particularly in terms of its impact on consumer spending.

"We still see weaker growth and lower inflation than the RBA is forecasting, as a result our view remains that the RBA will cut the cash rate to 1 per cent by year end," he said.

"At this stage it makes sense for the RBA to see what the budget and the election bring in terms of fiscal stimulus, but our base case is that the first cut will come around June but with the RBA moving to an easing bias at its May meeting."

Indeed.com Asia-Pacific economist Callam Pickering said the market has fully priced in a rate cut by September.

"The past six months has been the softest period for economic growth in around a decade," he said.

"Concerns over economic growth, along with falling house prices, low inflation and softer global growth, create a compelling argument in favour of lowering rates."

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