Cash Rate – No change

The Reserve Bank of Australia (RBA) has just announced it will maintain the official cash rate at 1.50%.

Australia’s headline inflation rate for the June quarter was 0.20%, much weaker than the market expectations of 0.40%, and resulted in a 1.90% increase to the year ending 30th June.  This is below the RBA’s target band of 2 to 3% and was influenced by weaker food, clothing, footwear and auto fuel prices. Underlying inflation, which strips out the volatile price movements, showed a quarterly rise of 0.50%, taking the annual rate to 1.80%.    These figures are important as they highlight the lack of any broad inflationary pressures in the Australian economy.  Together with a high Australian dollar (currently US80c) influencing a reduction in import prices and a much subdued wage growth it is hard to foresee a change to the cash rate until well into 2018.

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