Money Australia inflation to stay low for some time, limit case for rate rise - RBA

12:07  17 april  2018
12:07  17 april  2018 Source:

Next move is up, and it'll shock, says RBA

  Next move is up, and it'll shock, says RBA The next move in official interest rates won’t come for a while, but it will “shock”, says Reserve Bank Governor Philip Lowe.The next move in official interest rates will almost certainly be up, it won’t come for a while, and it will “shock”, Reserve Bank Governor Philip Lowe has warned.

Reserve Bank of Australia Governor, Philip Lowe.© AAP Image/Ben Rushton Reserve Bank of Australia Governor, Philip Lowe. Australia's central bank saw scant reason to raise interest rates this month given inflation remained below target and likely to remain subdued in the face of sluggish wage growth.

Minutes of the Reserve Bank of Australia's (RBA) April meeting showed its Board agreed the next move in rates was more likely to be up than down, assuming the economy gathered momentum as expected.

Yet, the Board also saw "no strong case" for a move in the near term, even as it notched up the longest period without a change in modern history.

The last move was a cut to 1.5 percent in August 2016, and financial markets are wagering this steady spell could last well into 2019.

RBA warns a sharp rise in interest rates could lead to disruptive and lasting market corrections

  RBA warns a sharp rise in interest rates could lead to disruptive and lasting market corrections Record <g class="gr_ gr_5 gr-alert gr_spell gr_inline_cards gr_run_anim ContextualSpelling multiReplace" data-gr-id="5" id="5">low interest</g> rates, accelerating asset prices and a growing appetite for risk could be laying the groundwork for a sharp correction across financial markets, the Reserve Bank has warned.&nbsp;In its latest Financial Stability Review released this morning, the RBA says strong global economic conditions over the past six months suggests asset prices have surged because investors "see little chance of adverse outcomes".

Crucially, wage growth and inflation has undershot expectations for some years and showed little sign of heating up soon.

"Low growth in labour costs in combination with strong competition in the retail sector suggested that inflation would remain low for some time," the minutes showed.

The bank had said exactly the same thing this time last year, underlining the lack of improvement.

There was also a note of caution in the Board's outlook, noting only that the economy "looked likely" to record faster growth in 2018 after a somewhat disappointing 2.4 percent outcome last year.

The labour market remained a bright spot with employment booming over the past year or so and leading indicators pointing to further gains ahead.

Yet unemployment had stayed stubbornly stuck around 5.5 percent and levels of underemployment were relatively high, a factor weighing on wage growth.

That, in turn, had restrained consumer incomes and spending power, particularly given record levels of household debt.

The Australian dollar keeps on falling .
The AUD/USD has fallen for six consecutive sessions, the equal-longest losing steak since May 2015.&nbsp;That's its equal-longest losing streak since May 2015.

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