Reserve Bank of Australia expectedly kept its interest rates unchanged

December 5, 2017 6:39 pmComments Off on Reserve Bank of Australia expectedly kept its interest rates unchangedViews: 45

Reserve Bank of AustraliaThe Reserve Bank of Australia expectedly kept its interest rates unchanged at level of 1.5%. The central bankers also warned that it will not change them soon, although other developed countries are targeting tightening monetary policy.

The Governor of the Reserve Bank of Australia, Philip Lowe, made it clear that he was in no hurry to follow the United States, Canada, and the UK, as well as several Asian and Asia-Pacific states, in withdrawing incentives.

The Australian central bank would like to see steady wage growth before raising interest rates, which means that for some time the interest rate change will not be on the agenda. This puts the bank out of sync not only with the Fed but also with the tightening cycle of monetary policy in the emerging Asia market.

Low interest rates in Australia have improved business conditions and encouraged businesses to recruit and invest. However, indebted households, due to the weaker wage growth, make it difficult to repay their debt while consuming. Philip Lowe said that following the boom in appointments this year, there are reasons for optimism in terms of wage growth.

He also said that the Australian economy has probably grown in line with trends over the past year. The expectations are for expanding in the third quarter by 0.7% qoq and by 3% yoy. The data comes out on Wednesday.

Philip Lowe said two weeks ago that if the economy continues to improve on expectations, the next change in interest rates will be rather in the direction of an increase rather than a decrease. The markets expect tightening of monetary policy not before December 2018.

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