The Reserve Bank of Australia cut its key interest rates for the third time this year, and noted further easing to support employment and income growth. The Bank's board, governed by Philip Lowe, decided on Tuesday to cut rates by 25 basis points to a record level at 0.75 per cent. The outcome of the meeting was in line with expectations. The bank earlier cut interest rates in June and July. The rate cut in July was the first since mid-2012.
The Board of Directors has decided to lower interest rates to support employment and income growth and provide greater confidence that inflation will be consistent with the Bank's medium-term objective. The bank said the economy still had spare capacity and that low interest rates would help make progress.
"It makes sense to expect a long period of low interest rates in Australia to reach full employment and achieve the inflation target," the bank said in its monetary policy statement. "The board will continue to monitor developments including the labor market and is prepared to further ease monetary policy if necessary, to support sustainable economic growth, full employment and the goal of inflation over time.”
Inflation is expected to be slightly below 2 per cent in 2020 and slightly above 2 per cent in 2021.
On the housing market, policymakers said there were other signs of a shift in housing markets, particularly in Sydney and Melbourne. However, new housing activity has weakened and housing credit growth remains low.
Marcel Thilliant, an economist at Capital Economics, said the interest rate would fall to 0.50 per cent before the end of the year.