Yesterday, the Reserve Bank of Australia (RBA) left the cash rate unchanged at 2% at its board meeting. The Bank remains ready to cut rates if required, which has been the circumstance for a while now.
The RBA is closely monitoring overseas developments as conditions in several emerging countries have more difficult whilst China’s has further slowed down. Financial markets have also been volatile as the RBA noted that investors remain uncertain global economic outlook and policy setting by the major economies. This is a key consideration for RBA in setting the direction of future monetary policy.
On a more positive note, the Australian economy,has seen significant growth in the labour sector as the economy adjusts away from the non-mining sector. Low wage growth, moderating houses prices and credit growth have helped keep inflation down. As such the RBA have decided that the “current setting in monetary policy is appropriate”.
The housing Market is an important consideration in policy setting for the RBA. With a February clearance rate of 75% for auctioned properties, the very strong start to the year could serve as a speed bump for further loosening in monetary policy setting. However, the general consensus going forward is that low inflation coupled with modest demand could see further monetary stimulus over the next financial year.
Image credits: By Danausi (Own work) [Public domain], via Wikimedia Commons