Australia’s central bank holds rates, analysts tip future cut

SYDNEY (AFP) – Australia’s central bank yesterday kept interest rates at a record low but said it would monitor developments as the economy stutters, with observers tipping a cut this year.

The economy grew just 0.2 per cent in the last three months of 2018 to take the annual rate of expansion to 2.3 per cent, below the Reverve Bank of Australia’s (RBA) forecasts.

Inflation is sitting at 1.8 per cent, which is also outside the central bank’s target range of 2.0-3.0 per cent.

RBA Governor Philip Lowe acknowledged weakness in both sets of economic data but said he was encouraged by the strength of the jobs market.

“The stronger labour market has led to some pick-up in wages growth, which is a welcome development,” he said in a statement after a monthly board meeting, which saw the bank keep rates at 1.5 per cent, where they have been since August 2016.

“Continued improvement in the labour market is expected to see some further lift in wages growth over time, although this is still expected to be a gradual process.”

However slowing economic growth – with house prices tumbling, inflation and wages growth remaining soft and high household debt – has seen economists start to price in up to two quarter-point cuts this year.

JP Morgan economist Tom Kennedy said Lowe’s decision to add the phrase “continue to monitor developments” in the closely watched final (paragraph) of his statement suggested it was open to cuts.