The cash rate for May has been announced by the Reserve Bank of Australia following its regularly scheduled monthly board meeting.
Surprising no one, the RBA has once again decided to hold the cash rate at 1.5%, a move that many have predicted.
It is the 20th straight month the RBA has left interest rates on hold.
Philip Lowe, Governor commented on the monetary policy decision:
“The global economy has strengthened over the past year,” he said. “A number of advanced economies are growing at an above-trend rate and unemployment rates are low. The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth. Globally, inflation remains low, although it has increased in some economies and further increases are expected given the tight labour markets. As conditions have improved in the global economy, a number of central banks have withdrawn some monetary stimulus and further steps in this direction are expected.”
Employment grows strongly, but growth has slowed over recent months
“The strong growth in employment has been accompanied by a significant rise in labour force participation, particularly by women and older Australians,” he said. “The unemployment rate has declined over the past year, but has been steady at around 5½ per cent for some months. The various forward-looking indicators continue to point to solid growth in employment in the period ahead, with a further gradual reduction in the unemployment rate expected.”
“Notwithstanding the improving labour market, wages growth remains low. This is likely to continue for a while yet, although the stronger economy should see some lift in wages growth over time. Consistent with this, the rate of wages growth appears to have troughed and there are reports that some employers are finding it more difficult to hire workers with the necessary skills.”
The housing markets in Sydney and Melbourne have slowed
“Nationwide measures of housing prices are little changed over the past six months, with prices having recorded falls in some areas,” he said. “In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. APRA’s supervisory measures and tighter credit standards have been helpful in containing the build-up of risk in household balance sheets, although the level of household debt remains high.”
“The low level of interest rates is continuing to support the Australian economy. Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual. 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.”