Australia’s central bank keeps rates low, consumers encouraged
Australia’s central bank kept interest rates at record lows for a 14th straight policy meeting on Tuesday, saying the stimulus was justified given the outlook for sub par growth even as consumers showed signs of opening their wallets.
The result surprised no one but the local dollar did edge higher as the Reserve Bank of Australia (RBA) refrained from escalating its verbal campaign for a lower currency.
Interbank futures had priced in no chance of a move this week, while a Reuters poll of 24 analysts had found all expected rates to stay on hold. All also suspect the next move will be up but not until far into 2015.
While low rates have supported home building and consumer wealth, the jury is still out on whether they alone will be enough to offset the drag from falling investment in the mining sector as a decade-long boom winds down.
The steep decline in prices for commodities, notably iron ore, is a major reason the RBA has been agitating for a greater drop in the local currency.
The labor market was also looking a little less healthy after revisions by the Australian statistician. The unemployment rate was now a tenth higher at 6.2 percent in September and 6.1 percent for August.
“The strength in retail hints at some spillover from the housing market, but the weakness of the labor market continues to work in the opposite direction, weighing on confidence and wage growth,” said Michael Turner, a strategist at RBC Capital Markets.
“There is little reason to think that the 2.50 percent cash rate will not persist until well into 2015.”
Source: reuters-Australia’s central bank keeps rates low, consumers encouraged
