Australian interest rates will remain unchanged at the historic low of 0.10 per cent after the Reserve Bank of Australia (RBA) handed down its official verdict on Tuesday afternoon.
RBA governor Philip Lowe said despite rollout of vaccines supporting the recovery of the global economy, the economic landscape remains fragile and unpredictable.
“The Board decided to maintain the current policy settings, including the targets of 10 basis points for the cash rate and the yield on the three-year Australian Government bond, as well as the parameters of the Term Funding Facility and the government bond purchase program,” he said in a statement.
“While there are still considerable uncertainties regarding the outlook, the central case has improved. Global trade has picked up and commodity prices are mostly higher than at the start of the year. Inflation remains low and below central bank targets.”
Mr Lowe said the decision to keep Australian interest rates at record lows reflects subdued wage and price pressures, which are expected to remain so for some years.
“It will take some time to reduce this spare capacity and for the labour market to be tight enough to generate wage increases that are consistent with achieving the inflation target,” he said.
“In the short term, CPI inflation is expected to rise temporarily because of the reversal of some COVID-19-related price reductions. Looking through this, underlying inflation is expected to remain below 2 per cent over the next few years.”
Mr Lowe said pricing was a key indicator for the recovery of the nation’s housing market.
“Housing credit growth to owner-occupiers has picked up, with strong demand from first-home buyers. In contrast, investor credit growth remains subdued,” he said.
“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
Homeloanexperts.com.au chief executive Alan Hemmings said the decision was expected, despite concerns around how overheated the property market may become.
“While the RBA will be watching affordability closely over the next few months and we may see some regulatory measures in the future, it would be premature to increase rates at this stage,” he said.
“What I do expect to see is low fixed rates begin to rise as the government slows its term funding facilities for lenders.”
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