Reserve Bank of Australia Leaves Cash Rates Unchanged

Ibeth Rivero

The Reserve Bank of Australia just announced its decision to leave cash rates unchanged at 0.1 percent, in line with analysts' expectations.

After announcing the decision, RBA Governor Philip Lowe commented that the housing markets have strengthened, as prices are rising in all major markets and credit growth has picked up. Because of this, the bank pledged to keep monitoring trends in the housing markets in a careful way.

Investment lending for homes stood at 12.7% in March, against the previous month’s 4.5%. Home loans went up by 3.3% after contracting by 1.8% in February.

“Given the environment of rising housing prices and low-interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” commented Lowe.

The bank now expects the GDP to rise by 4.75% this year and 3.5% next year, and highlighted that economic recovery has been stronger than expected and is expected to continue this way. Unemployment levels have also improved, having fallen to 5.6% in March, with the number of employed people now greater than before the pandemic.

Despite the improving economic situation and the rising housing prices, the bank is not raising the cash rates until the bank's inflation target is reached, which is currently between 2% and 3%. The bank explained that this would happen if the labor market is tight enough to generate a growth in wages that is substantially higher than the current pace, which won't happen until 2024 at the earliest.

Inflation is expected to pick up gradually. This year, inflation is expected to hit 1.5% and rise to 2% in 2024.

Regarding the term funding facility scheme, which provides cheap debt to banks, the RBA commented that that is probably going to stop by the end of June.

The Australian Bureau of Statistics reported that the trade balance stood at 5574 million, lower than the previous month’s 7595 million and below expectations of 8000 million. In monthly terms, imports rose by 4% after increasing by 4.7% in February. Exports contracted by 2% after dropping by 1% in the previous month.

By 9:41 GMT, the Australian dollar went down by 0.55% against the US dollar, falling to the 0.7719 level.

Ibeth Rivero

Ibeth contributes daily market commentary in both English and Spanish (both of which she speaks fluently) and she also manages the DailyForex mobile app to ensure that traders around the world are getting important market updates in real time.

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