RBA leaves cash rate on hold

The Reserve Bank of Australia (RBA) made the announcement following its monthly policy meeting.

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He said the global economy was expanding at a moderate pace, and while there was a few softening in conditions in China and east Asia, growth in the United States was stronger.

Meanwhile, although dividend investors might be somewhat disappointed about the RBA’s decision, it is clear that interest rates are set to remain low for the foreseeable future.

Overall, however, very little changed in the statement.

UBS chief economist Scott Haslem said the RBA is confident the Australian economy is rebalancing moderately, and that signs of improvements are coming through.

The Reserve Bank noted that moderate expansion in the domestic economy continues, if somewhat below longer-term averages. Traders were preparing themselves for the bank to take a tougher line after Australia & New Zealand Banking Group economists changed their house view to predict two more rate cuts next year.

“In such circumstances, monetary policy needs to be accommodative”.

There was no reference to the need for a lower Aussie and the message that rates are still appropriate at 2% suggests no rush to ease further. It also does not seem overly anxious about a housing bubble prompted by easy money: “Regulatory measures are helping to contain risks that may arise from the housing market”.

“However given the slide in the Australian dollar, it could be that the lift in imports is more likely a price effect – the weaker Aussie dollar essentially making it more expensive to purchase imports”.

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“Further information on economic and financial conditions to be received over the period ahead will inform the board’s ongoing assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target”, the governor concluded.

Financial market betting suggests there is a 52 per cent chance of a rate cut by December