RBA: Australia's central bank keeps interest rates on hold

Australia’s Reserve Bank (RBA) has decided to hold interest rates in its April decision. A widely expected move.

RBA Source: Bloomberg

The RBA decided to leave the cash rate unchanged at 1.5%, where it has been since mid-2016.

The central bank showed no indication of dovishness in its April policy meeting and no urgency.

'The Australian labour market remains strong,' said RBA Governor Philip Lowe in the statement. 'urther progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual.' Lowe states.

The announcement comes ahead of the release of the country’s annual budget on Tuesday night. The budget is expected, by some, to be filled with tax breaks and infrastructure spending, stimulus which analysts say in turn might lessen the need for future rate cuts.

Governor Lowe said, the central bank board would monitor developments and set monetary policy to “support sustainable growth."

IG market analyst Kyle Rodda says the decision was unlike New Zealand's central bank's shift in tone last week. The RBNZ stated last week, an unexpected shift in tone, indicating a future interest rate cut.

'The RBA effectively maintained their line on the Australian economy – although it did try to highlight some of the international headwinds the economy faces. One would imagine that they’d the RBA would be pretty keen not rock the boat before tonight’s budget.' Mr. Rodda said.

Australian dollar price

The Aussie dollar traded erratically in the moments following the release,

AUD/USD bounced to $0.7085 with support at $0.700-05

Markets reacted aggressively, pricing in two quarter-point easing in its 1.75% cash rate.

'It’s [The Australian dollar] effectively faded lower now, despite AGB yields ticking higher on some expanded commentary by the RBA on the inflation outlook. The ASX traded just as it had prior to the release.' Mr. Rodda said.


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