Australia's central bank decided to retain its interest rate at a record low for the ninth consecutive meeting amid signs of slowing growth.
The board of the Reserve Bank of Australia, governed by Philip Lowe, kept the cash rate unchanged at 1.50 percent, as widely expected, on Tuesday. The bank had reduced the rate by 25-basis points each in August and May last year.
"The Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time," the bank said in a statement.
Year-ended GDP growth is expected to have slowed in the March quarter, the bank said. Nonetheless, RBA expects economic growth to increase gradually over the next couple of years to a little above 3 percent.
Policymakers observed that the depreciation of the exchange rate since 2013 assisted the economy in its transition following the mining investment boom. An appreciating exchange rate would complicate this adjustment, the bank noted.
The Australian Bureau of Statistics is scheduled to issue quarterly national accounts on June 7. Economists forecast GDP to grow only 0.3 percent in the first quarter.
Paul Dales, an economist at Capital Economics said the RBA would be willing to look through a temporary fall in GDP, but it would find it harder to ignore two weak quarters in a row.
Although the central forecast is that interest rates will remain at 1.5 percent this year, the economist said the chances of a cut later in the year have increased somewhat.
On the labor market, the RBA said the various forward-looking indicators point to continued growth in employment over the period ahead.
Wage growth remains low and this is likely to continue for a while yet. Inflation is forecast to increase gradually as the economy strengthens.
Further, the bank observed that conditions in the housing market vary considerably across the country. Growth in housing debt has outpaced the slow growth in household incomes. The supervisory measures should help address the risks associated with high and rising levels of indebtedness, the bank said.
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