Australia’s Central Bank keeps rates on record low level

The Central Bank of Australia left its key interest rate unchanged at a record low of 1.5%, as the regulator assesses the impact of falling property prices on the economy.

The decision of the central bank coincided with the forecast of analysts. The Reserve Bank of Australia has kept the rate at the current level since 2016. Housing prices in Australia fell by 0.5% last month, helped by falling prices in Sydney and Melbourne, CoreLogic Inc. data showed. Prices in two cities on the east coast fell in annual terms by 6.1% and 3.4%, respectively.

The Reserve Bank of Australia, as a rule, avoids raising rates when prices in Sydney fall. This, along with weak wage growth and moderate inflation, explains why traders believe that the likelihood of monetary tightening by 2020 will be small. Meanwhile, the Australian economy is growing by more than 3%, and unemployment is 5.3%.

Low interest rates continue to support the economy of Australia, said the head of the central bank Philip Lowe. He looks forward to further progress in reducing unemployment and returning inflation to the target indicator, although this progress is likely to be gradual.

Lowe noted that the Australian economy over the past year has demonstrated strong growth, but US trade policy creates constant uncertainty for the prospects for the global economy.

The main forecast of the bank still suggests growth rates on average slightly above 3% in 2018 and 2019. Business conditions are positive, and investment in a business not related to mining is expected to increase, the head of the Central Bank added.

The Australian dollar fell by almost 11% compared with the January peak, increasing the competitiveness of exports. While the Central Bank of Australia keeps the rate unchanged, the US Federal Reserve has tightened its policies. It is expected that this trend will continue, increasing the difference between rates in the US and Australia and maintaining pressure on the Australian currency

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