Australia’s central bank held interest rates at a record low of 1.50 percent Tuesday but soft inflation and growth figures kept the door open for future cuts.
The Reserve Bank of Australia slashed rates 300 basis points between November 2011 and August last year to support non-resources industries as the economy transitions out of a mining investment boom.
After its first meeting this year, the RBA’s governor Philip Lowe said “the board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time”.
The decision was widely tipped by economists, and the Australian dollar was largely unchanged at 76.35 US cents after the statement.
It was the bank’s first rate announcement since data showed the economy shrank in the third quarter of 2016, marking just the fourth retreat in a quarter of a century.
The 0.5 percent contraction in July-September, which slowed the annual growth rate to 1.8 percent, came as government and consumer spending weakens and trade also softens, underlining the challenges facing the economy.
Lowe noted growth was “weaker than expected” in the September quarter but said this was largely due to “temporary factors” and “a return to reasonable growth is expected in the December quarter”.
