SYDNEY – Australia's central bank left interest rates on hold as expected Tuesday, indicating that it remains satisfied with the progress of the economy and that inflation remains on track to gain speed over time.
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"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," said Philip Lowe, governor of the Reserve Bank of Australia, in a statement.
Interest rates have been left unchanged since August last year as the RBA juggles fears around rising house prices and record household debt, with signs of weakness in the job market and a slowdown in consumer spending.
Still, recent data has shown house price growth has slowed in response to a tightening of regulations around mortgage lending in March. Some economists argue that if this continues, it could remove the biggest hurdle to a further interest rate cut.
Mr. Lowe acknowledged some improvement in the housing market.
"Conditions in the housing market vary considerably around the country. Prices have been rising briskly in some markets, although there are some signs that these conditions are starting to ease," he said.
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The job market in Australian remains "mixed," but forward looking indicators of job creation point to growth, he said.
"Wages growth remains low and this is likely to continue for a while yet. Inflation is expected to increase gradually as the economy strengthens," he added.
Over the last month, financial markets have nudged higher bets on a rate cut by the end of the year to a probability of around 20%.
The verdict of the RBA board comes ahead of the release of first quarter GDP growth data Wednesday, which some economists expect will show the economy contracted over the quarter, while growing at its slowest on-year pace in around seven years.
Weak consumer spending, softer exports and falling housing construction likely underlie the economy's struggle for a pulse in the quarter.
A severe storm, which shut in Queensland coal exports in March and drenched New South Wales, is also likely to have played a part in cooling growth.
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(END) Dow Jones Newswires
June 06, 2017 01:09 ET (05:09 GMT)