Reserve Bank locks in monthly cash rate call

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Reserve Bank locks in monthly cash rate call

The Reserve Bank of Australia (RBA) has today announced it will again hold the cash rate at 1.50%, making this the seventh month without a rate movement.

Last month, RBA Governor Philip Lowe said the market was "reasonable" to price in unchanged rates for all of 2017, arguing further cuts would only stoke a debt-fuelled bubble in house prices.

"Exports have risen strongly and non-mining business investment has risen over the past year", he said. "Consumption growth was stronger towards the end of the year, although growth in household income remains low".

"An appreciating exchange rate would complicate this adjustment." .

The Australian dollar was up 0.2% against its US counterpart Tuesday morning to trade just below 76 USA cents.

The decision to hold the RBA cash rate at 1.5 per cent falls in line with expectations held by members of the ANU Centre for Applied Macroeconomic Analysis (CAMA) RBA Shadow Board, of which around 60 per cent predicted rates would remain at their current level. "Supervisory measures have contributed to some strengthening of lending standards".

The RBA also said the declining Aussie dollar has helped the Australian economy recover over the last 4 years.

At present, the Australian economy is still undergoing the transition process from its investment mining boom, which grew 2 ½% last 2016.

"They continue to capture a sense of uncertainty over labour market outcomes and the composition of job creation, which is intertwined with weaker than expected wages growth and a slight nudging down of the RBA's core inflation forecasts over the medium term", she said in a note.

As a result, the reflation story playing out in the developed world has so far bypassed Australia, where consumer-price growth is languishing below the central bank's 2 percent to 3 percent target. The underlying inflation is also believed to still remain low for some time.

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