Australia’s central bank left its benchmark cash rate unchanged at a record low of 1.0 percent and confirmed its guidance from last month that it is willing to cut rates further if needed to support economic growth and reach its inflation target.
The Reserve Bank of Australia (RBA), which cut its rate in June and July by a total of 50 points before holding it steady in August, also reiterated that it expects to keep interest rates low “for an extended period” to help reduce unemployment and make progress in boosting inflation.
As in August, RBA Governor Philip Lowe described the outlook for the global economy as “reasonable,” but the risks remains tilted to the downside as trade and technology disputes are affecting international trade and investment as businesses scale back spending due to uncertainty.
Australia’s economy slowed sharply in the first half of this year with gross domestic product up by only 1.8 percent year-on-year in the first quarter, down from 2.3 percent in the previous quarter.
But in its monetary policy statement from last year the RBA said growth was likely to have troughed in the middle of this year and forecast growth of 2.4 percent this year and 2.75 percent next year, supported by low interest rates, tax cuts, infrastructure spending, stabilization of the housing market and a brighter outlook for the resources sector.
Sluggish growth has kept a lid on inflation, which is expected to remain subdued for some time, hitting a little under 2 percent in 2020 and a little above 2 percent in 2021.
Headline inflation rose to 1.6 percent in the second quarter from 1.3 percent in the first quarter, but is still below RBA’s target of 2.0 to 3.0 percent.
Australia’s dollar firmed slightly in response to the RBA’s decision, which was largely as expected, to around 1.49 to the U.S. dollar, down 4.7 percent this year.
The Reserve Bank of Australia issued the following statement by its governor, Philip Lowe:
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