RBA meeting: interest rates remain unchanged at 1.00%

RBA statement at a glance

RBA Governor Philip Lowe today announced that Australia’s official cash rate would remain on hold at 1.00%.

Though Governor Lowe believes the global growth outlook remains 'reasonable', he noted that risks are currently 'tilted to the downside.'

US-China trade tensions in focus

Unsurprisingly, Governor Lowe attributed much of the global uncertainty that we are currently witnessing to the US-China trade tensions – which have escalated in recent weeks.

Here, it was further noted that:

'The trade and technology disputes are affecting international trade flows and investment as businesses scale back spending plans due to the increased uncertainty.'

Even when considering such risks, Governor Lowe still pointed out that, 'the persistent downside risks to the global economy combined with subdued inflation have led a number of central banks to reduce interest rates this year and further monetary easing is widely expected.'

This has indeed been the trend across a number of advanced economies in recent times.

The US Fed for example cut interest rates by 25 basis points in July.

The Reserve Bank of New Zealand went even further in August, cutting the official cash rate by 50 basis points – to 1.00%.

Finally, while the Australian dollar (AUD) has floated around 10-year lows in the last few days, as IG Market analyst Kyle Rodda tweeted – the AUD 'popped' in response to the RBA’s decision to keep interest rates on hold.

A housing turnaround

Low and stagnant income growth, as well as declining house prices have combined to see household consumption take a hit in recent times.

Even so, Governor Lowe was keen to point out there are 'signs of a turnaround in established housing markets, especially in Sydney and Melbourne.'

Ultimately however, with interest rates at historic lows and with an already weakened property market, signs of a turnaround should potentially come as little surprise to those following the situation.

Where are interest rates are heading next?

The RBA’s media release today suggests that interest rates will remain low for the foreseeable future. In a quote that many media outlets have already latched onto, Governor Lowe maintained that:

'It is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.'

In line with this, the RBA remains committed to easing monetary policy further where required, should the economy require an additional boost.

The RBA remains committed to hitting its 2020 inflation target of a 'little under' 2%.