RBA Keeps Cash Rate Unchanged on Lower AUD, Rising Asset Prices

• Published on
• 03 Dec 2019, 02:59 PM

By Sophia Rodrigues

The Reserve Bank of Australia left the official cash rate unchanged at 0.75% citing the stimulatory effect from the past three cuts on the economy via the lower exchange rate, asset prices and lower mortgage rates. It left the easing bias intact but signalled a preparedness to wait longer and monitor developments due to the long and variable lags in the transmission of monetary policy.

The RBA previously mentioned "long and variable lags" in the minutes of the November board meeting but putting it in Tuesday's cash rate statement may be a hint that it would not rush into lowering the cash rate again. This is especially so because the lower cash rate is having the desired impact on the exchange rate, and the RBA made a mention of this in the statement. 

"The lower cash rate has put downward pressure on the exchange rate, which is supporting activity across a range of industries," the RBA said. The RBA also pointed to the effect of past easing on asset prices which it expects to lead to increased spending in the economy, and lower mortgage rates which is boosting household disposable income.

The RBA also appears to be taking some comfort from developments in the global economy where it noted "risks have lessened recently."

Most of the commentary on the local economy was little-changed from the month before. The RBA maintained the Australian economy appears to have reached a gentle turning point.

--Contact: sophia@centralbankintel.com