For the first time in three months, the Reserve Bank of Australia (RBA) has held interest rates steady at 1.00 per cent. This is in lieu of the previous interest rates cuts earlier this year (back-to-back cuts in June and July 2019) as the bank waits to see what impact this has on the jobs market and general Australian economy.
Governor Philip Lowe stated that the outlook for the global economy remained reasonable, but increased uncertainty generated by trade disputes were affecting investment; the risks to the global economy remain tilted to the downside.
"The persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year and further monetary easing is widely expected," he said.
"It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target."
The chance of a rate cut taking place at the RBA’s Tuesday meeting was estimated at just 10 per cent. But amid the US-China trade dispute, expectations of further support from the RBA over coming months have been growing. A cut to 0.75 per cent is now expected from November, while some markets now think the RBA will take the cash rate to as low as 0.5 per cent by May 2020.
CoreLogic's head of research, Tim Lawless, said with the RBA cutting rates at its past two meetings, its decision to hold in August was unsurprising.
"The pause in the cutting cycle will give the RBA time to assess the effects of earlier rate cuts on the economy and consumer spending, however, there is a strong likelihood of at least one more cut later this year," he said.
"With mortgage rates set to remain low for an extended period of time, as flagged by RBA governor Lowe in a speech last month, and potentially move even lower later this year, we are expecting to see the housing market move into a gradual recovery. However, with credit policies remaining tight and economic uncertainty still elevated, we aren't expecting a material acceleration in housing activity or housing values."
The move came amid some positive news on the Australian trade front, with the country recording a record $8 billion trade surplus in June.
For the official RBA article, please visit the Reserve Bank’s website.