e Reserve Bank of Australia keeps interest rates unchanged. The president said unemployment is the key to the economic outlook.

Release time：May 08, 2019 From：admin

AUD Lowe, the governor of the Reserve Bank of Australia, kept interest rates unchanged in less than two weeks from the election to keep interest rates low. He said that reducing unemployment is a necessary condition for accelerating inflation.

After economists and the money market's opinion on this decision was almost equally divided, Lowe kept the cash rate at 1.5%, which has been maintained since he took office in September 2016. This is the first time that the central bank governor held a regulation meeting with a group of economists. After the weak inflation in the first quarter, many economists turned to call for interest rate cuts.

Lowe said in a statement that the RBA "recognizes that there is still idle capacity in the economy and may require further improvement in the labor market to keep inflation in line with the target." "In view of this assessment, the Council will be in the upcoming meeting. Pay close attention to the development of the labor market."

The central bank withstood the greater pressure to loosen monetary policy and tried to avoid entering the final stages of the campaign. Lowe insists on his view that a solid employment will tighten the labor market and stimulate wage growth. Despite the economic slowdown, consumer price growth has been weak.

After his statement, the Australian dollar rose against the US dollar, and the Australian dollar reported US$0.7041 against the US dollar. Before he issued the statement, the Australian dollar reported $0.7001 against the US dollar. The three-year bond price plummeted and the yield rose by 7 basis points to 1.31%, the largest increase since April 2018.

After convinced that interest rates will be cut in July, traders have lowered their expectations for interest rate cuts and made full pricing in the first rate cut in September.

“The main domestic uncertainty is still the prospect of household consumption. Long-term low-income growth and falling house prices are affecting household consumption.” Luo Wei said, “The growth of household disposable income is expected to rise to a certain extent, which should support consumption."

Over time, the reasons for interest rate cuts have become more persuasive: economic growth has slowed sharply, inflation has moderated, real estate prices have fallen, household spending has been weak, debt has been high, and wages have stagnated.

The main reason for maintaining interest rates remains the stability of employment, the unemployment rate is close to an eight-year low, investment is reasonable, and trade prospects are optimistic, as commodity exports remain strong. In addition, both parties are committed to tax cuts, cash back and infrastructure investments, which should support the economy.

According to Lowe, the main idea is that the Australian economy will grow by about 2.75% in 2019 and 2020. This is lower than the previous forecast of 3% growth this year.

The Australian central bank’s confidence in the economic outlook has been shaken due to weak consumer spending and falling house prices. Sydney house prices fell 14.5% from their peak in 2017. In February of this year, the central bank gave up the tendency to tighten policy.

“Inflation data in the third quarter was significantly lower than expected, indicating that inflationary pressures in the entire economy have eased.” The governor said, “ Looking ahead, inflation expectations will pick up, but this will only gradually pick up.”

*contradiction*

Lowe reiterated that the job market is still at the core of the economic outlook and pointed out that the employment outlook indicator is positive. However, there are signs that this is changing, and a private report earlier today showed that construction jobs in April had the biggest decline in six years.

Like other developed countries, the RBA is also confused about the contradictions in the economy: economic growth slowed in the second half of 2018, and the annualized growth rate fell from nearly 4% in the first half to 1%; at the same time, the unemployment rate fell. The tax revenue from the strong growth of jobs has enriched the government's treasury.

“The Australian labor market is still strong.” Lowell said, “The number of employed people has increased significantly, the vacancy rate is still high, and there are reports of skills shortages in some areas.”