Treasurer gives RBA more time on inflation

Treasurer gives RBA more time on inflation

In fact, overnight swaps are now pricing a 94.0% probability that the RBA will leave its benchmark interest rate unchanged, which is up quite significantly from the 60.4% probability on October 16 prior to the release of the high-impact Australia employment report that revealed the unemployment rate edged down slightly from 5.3% to 5.2%.

"[These are] the lowest mortgage rates [we've had] since at least the 1950s", he said.

The cuts have been successful in breathing life into a moribund housing market, with revived demand driving prices up last month by the most since 2015.

In his statement, RBA Governor Philip Lowe said while the outlook for the global economy remains reasonable, the risks are tilted to the downside. The short-term uptrend in the Australian Dollar could begin to unwind, however, if the RBA reiterates its accommodative monetary policy stance as the central bank continues to chisel away at excess capacity across the Aussie economy.

While inflation has been below the 2-3 per cent band for some time, I recognise that Australia is not alone in experiencing an extended period of low inflation, low unemployment and low interest rates.

He noted that low interest rates, tax cuts, infrastructure spending, rising house price and a recovering resources sector should all support growth.

The Statement on the Conduct of Monetary Policy agreed between the central bank and the government was established in 1996 and has been updated six times since then.

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Mr Lawless said while several key economic indicators have stabilised, the RBA would likely be carefully monitoring other indicators which have continued to lose momentum such as consumer confidence, residential construction activity and retail spending.

Detailed forecasts for the next couple of years will be released in the RBA's quarterly statement on monetary policy due on Friday.

Inflation is one measure by which the judgement is made, edging higher to 1.7 percent according to the latest data, but remaining firmly below the RBA's target of 2-3 percent.

The question for budding homebuyers in Sydney and Melbourne especially is just how fast property prices will move.

Its long-standing inflation target confirmed by Treasurer Josh Frydenberg, the Reserve Bank is widely expected to leave the cash rate unchanged at its monthly board meeting today.

"Irrespective of what the Reserve Bank does, rate cuts remain available to borrowers with interest rates as low as 2.69 per cent".

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