Australia's central bank retained its record low interest rate on Tuesday, as a hike to cool property prices could hurt the labor market and household borrowing.
The board of the Reserve Bank of Australia, governed by Philip Lowe, kept the cash rate unchanged at 1.50 percent. The bank had reduced the rate by 25-basis points each in August and May last year.
"Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank said in a statement.
The Australian economy continues its transition following the end of the mining investment boom. Recent data reflects ongoing moderate economic growth, policymakers observed.
Some indicators signaled that the labor market has softened, however, the forward-looking indicators still point to continued growth in employment over the period ahead, the bank said.
The RBA stressed that the outlook continues to be supported by the low level of interest rates.
The depreciation of the exchange rate since 2013 has also assisted the economy in its transition following the mining investment boom and an appreciating exchange rate would complicate this adjustment, policymakers added.
The central bank expects headline inflation to pick up over the course of this year to be above 2 percent. The rise in underlying inflation was forecast to be a bit more gradual with growth in labor costs remaining subdued.
Growth in household borrowing, largely to purchase housing, continues to outpace growth in household income. Policymakers noted that by reinforcing strong lending standards the risks associated with rising indebtedness could be addressed.
by RTT Staff Writer
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