SYDNEY – The Reserve Bank of Australia left its benchmark interest rate steady at a policy meeting Tuesday as inflation continues to show weakness despite a surging job market and a stronger global economy.
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The official cash rate was held at 1.5%, where it has sat since August 2016, with little expectation the central bank will budge from its neutral stance in the near-term.
"The low level of interest rates is continuing to support the Australian economy," RBA Gov. Philip Lowe said Tuesday. "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."
While many of the bank's global peers, including the Federal Reserve, the Bank of Canada and the Bank of England, have raised interest rates as their economies pick up momentum, mixed trends in the Australian economy have the RBA cornered for now.
Inflation was weak in the third quarter, while record low wage growth and a drop in retail sales in recent months also favor continued support for the economy.
Australia's statistician announced a re-weighting of the consumer price basket this week that will lower inflation levels further.
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Still, the economy is not without its bright points with the job market surging this year led by full-time job creation, while decade-high business conditions point to ongoing hiring momentum.
The RBA will publish new economic forecasts on Friday amid expectations it might lower its expected trajectory for inflation over the next year. Still, Gov. Lowe reiterated Tuesday the bank's central forecast was for inflation to pick up gradually.
A more benign inflation outlook would signal the RBA is prepared to remain sidelined well into 2018, and potentially for some time beyond, resisting the lead of overseas central banks.
The Australian dollar also remains elevated, creating a headwind to stronger GDP growth and higher inflation, another factor that calls for a cautious stance.
But there is a cost to keeping interest rates low over the long-term as it is adding to financial instability risks, with borrowing for housing easily outstripping income growth.
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(END) Dow Jones Newswires
November 06, 2017 22:55 ET (03:55 GMT)