UPDATE 1-Australia central bank does not see case for near-term rate rise
Published Feb 16, 2018 10:15
UPDATE 1-Australia central bank does not see case for near-term rate rise
(Recasts with governor comments)
By Swati Pandey
SYDNEY, Feb 16 (Reuters) - The Reserve Bank of Australia (RBA) expects to make only gradual progress in reducing unemployment and having inflation return to its 2-3 percent target band, signaling interest rates will stay at record lows for a while yet.
The RBA has held rates at 1.50 percent since last easing in August 2016, as it seeks to strike a balance between the benefits of policy stimulus and the risks associated with skyrocketing household debt.
That is the longest stretch of stable rates since the mid-1990s and Governor Philip Lowe is willing to be patient still.
"Our central scenario for the Australian economy is for a further reduction in the unemployment rate and an increase in inflation towards the mid-point of the target range," Lowe told a parliamentary economics committee.
"As things currently stand, we expect that progress to be steady, but to be only gradual," Lowe added. "Given this assessment, the Reserve Bank board does not see a strong case for a near-term adjustment of monetary policy."
Australia has seen a jobs boom since the beginning of 2017 but the unemployment rate is stuck around 5.5 percent as more people go looking for work. Meanwhile, inflation has undershot the RBA's target for more than two years. RBA is loathe to ease again as it fears lower interest rates would push households into a debt binge. Already the household debt to income ratio is at record highs.
Lowe noted that the build-up of risks in household balance sheets has been contained, thanks to macroprudential measures, although dangers remain.
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Written By: Reuters
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