At its meeting today, the Board decided to maintain the cash rate at its record low level of 0.1% in line with its previous expectations. In addition, the Board also announced that the cash rate will not be increased until actual inflation is sustainably within the 2-3% target range.
In his statement, RBA Governor Philip Lowe said, “Financial conditions in Australia continue to be highly accommodative. Interest rates remain at a very low level, although some fixed rates have risen recently. The Australian dollar exchange rate is around its lows of the past year or so. Housing prices have risen strongly, although the rate of increase has eased in some cities. With interest rates at historically low levels, it is important that lending standards are maintained and that borrowers have adequate buffers.”
Dr Lowe also commented on the local impacts of global events; “The global economy is continuing to recover from the pandemic. However, the war in Ukraine is a major new source of uncertainty. Inflation in parts of the world has increased sharply due to large increases in energy prices and disruptions to supply chains at a time of strong demand.”
“Bond yields have risen over the past month and expectations of future policy interest rates that increased.”
“The Australian economy remains resilient, and spending is picking up following the Omicron setback. Household and business balance sheets are in generally good shape, an upswing in business investment is underway, and there is a large pipeline of construction work to be completed. Macroeconomic policy settings remain supportive of growth.”
“The resilience of the economy is evident in the labour market, with the unemployment rate at a 14-year low of 4.2 per cent. Underemployment is also around its lowest level since 2008.” He also added, “The RBA’s central forecast is for the unemployment rate to fall to below 4 per cent in the year and to remain below 4 per cent next year.”
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