RBA Rate February 2019

RBA keeps interest rate on hold

Following its first monetary policy meeting of 2019, The Reserve Bank of Australia has left official interest rates on hold at 1.5 per cent due to numerous factors including low inflation and wage growth, and a slowing economy weigh.

The rate has now been on hold at this current record low for 30 months straight, but financial markets are predicting the next rate move is more likely to be a cut than a hike as declining house prices impact on household spending. According to a poll of 28 experts and economists by comparison website Finder.com.au, only 40 per cent now believe the next move will be up, compared with about 80 per cent for the past two years.

This decision comes in the wake of worrying signs the domestic economy has been deteriorating over the summer as the global economy slows down.

RBA governor Philip Lowe stated that growth in household income had been low over recent years, but was expected to pick up and support household spending.

"The main domestic uncertainty remains around the outlook for household spending and the effect of falling housing prices in some cities," he said.

"GDP growth in the September quarter was weaker than expected. This was largely due to slow growth in household consumption and income."

The central scenario is for the domestic economy to grow about 3 per cent this year and a little less in 2020, down from the 3.5 per cent forecasted in December 2018.

In other areas of the economy, the labour market remains steady and the unemployment rate is falling towards approximately 5 per cent. While this might sound like a booster to consumer confidence, retail sales revealed a 0.4 per cent reduction in sales during 2018’s Christmas period.

For the official RBA article, please visit the Reserve Bank’s website.