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Economics Gazette

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November 20, 2019

Australian Central Bank kept the key interest rate unchanged

RBA governorThe Australian Central Bank kept the key interest rate unchanged at a record low level. Thus the financial regulator recorded the longest unchanged period – almost three decades. This period of inactivity seems to continue for more. As originally expected, the Reserve Bank of Australia ended its April meeting with a decision to keep the interest rate at 1.5% at its August 2016 levels. The 20-month period is the longest without change since the interest rate indicator has been used since 1991.

“The inflation is likely to remain low for some time, reflecting the weak growth in labor costs and strong competition in retail”, said Australian central bank governor, Philip Lowe. He also said he expects a reduction in unemployment in the country and inflation to go back to its target, although this is likely to happen gradually.

Philip Lowe has repeatedly stressed that the Central Bank’s Board does not see an opportunity in the short term to raise interest rates, showing patience that his predecessor liked to call “master inaction”.

The analysts expect to have an increase in interest rates by the end of the year, while the other half believe that this could only happen in 2019.

Among the main reasons for retention of interest rates in the country is that, despite the rising labor market, the salaries do not go up. In addition, there is a cooling of the housing market.

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