SYDNEY (Reuters) – Australia’s central bank held rates at a record low on Tuesday and opened the door wider for future cuts if the jobs market fails to push unemployment lower as retailers suffered their worst quarter in seven years.
The Reserve Bank of Australia’s (RBA) decision to hold rates wrongfooted some doves and sent the Aussie dollar rising 0.9 percent to a one-week top of $0.7048. Rates futures had a 36 percent chance of a cut on Tuesday.
Calls - Analysts - RBA - Policy - May
Calls from some analysts for the RBA to ease policy at its May meeting had intensified after first-quarter inflation came in below expectations last month to undershoot the central bank’s 2-3 percent target for 13 straight quarters.
In holding the cash rate, the RBA board “recognized that there was still spare capacity in the economy and that a further improvement in the labor market was likely to be needed for inflation to be consistent with the target,” it added.
Assessment - Board - Attention - Developments - Labor
“Given this assessment, the Board will be paying close attention to developments in the labor market at its upcoming meetings,” the RBA said.
The on-hold decision comes just 10 days before a closely-fought national election where Prime Minister Scott Morrison is campaigning on being a strong economic manager. The opposition Labor Party – the favorites to win – is championing workers rights, including stronger wage growth and personal tax cuts.
RBA - Decision - Country - Labor - Market
Helping the RBA’s decision, the country’s labor market has been going from strength to strength since 2017 with unemployment near an eight-year trough of 5 percent.
However, the jobless rate has barely budged in the past six months and the RBA expects it to stay around current levels over the next year or so before declining to 4.75 percent in 2021.
“It’s all about...
Wake Up To Breaking News!
I find it extremely funny when people keep voting and expecting the government to change!