In its monetary policy meeting from yesterday, the Governing Board of Directors of the RBA has decided to keep the interest rate in Australia unchanged at its previous level of 0.75 per cent.
Australia Interest Rate. Image source: TradingEconomics.com
The decision comes as no surprise, given the inflationary pressures that were observed in the country over the last quarter in conjunction with a robust labour market. As we argued in our Weekly Expectations article from Monday:
“As regards inflation, the price stability in Australia has improved over the previous period. Seasonally adjusted inflation has risen to 1.7% in October, which gets closer to, but still below, RBA's 2% symmetric target range.”
In its post-decision monetary statement, the Board observed the economic conditions both internally and internationally and argued that:
“After a soft patch in the second half of last year, the Australian economy appears to have reached a gentle turning point. The central scenario is for growth to pick up gradually to around 3 per cent in 2021. The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth. “
Regardless, the recent escalation of the global trade uncertainty is likely to prompt subdued growth in Australia, if the negotiations impasse continues to be prolonged indefinitely.
The local economy is more than likely to go through another soft patch in Q1 of 2020 if China and the US continue to mutually impasse tariffs on each other.
Meanwhile, the Australian dollar rose with 0.40 per cent against the euro following the interest rate decision.
The Aussie, however, depreciated on Wednesday following the renewed escalation in global trade disputes.
The EURAUD is currently consolidating just below the major resistance level at 1.62450.
EURAUD 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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