Australia Keeps Key Rate At Record Low

Australia's central bank maintained its key interest rate unchanged, as widely expected, after cutting it by a quarter point in October.

The board of the Reserve Bank of Australia, governed by Philip Lowe, decided to leave the cash rate unchanged at a record 0.75 percent.

The central bank had lowered the rate by 25 basis points in October, which was the third such reduction this year.

The RBA said the easing of monetary policy since June is supporting employment and income growth and a return of inflation to the medium-term target range.

The bank reiterated that it is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.

Further, the bank said it is reasonable to expect that an extended period of low interest rates will be required in Australia.

According to RBA, inflation will pick up, but only gradually. In both headline and underlying terms, inflation is expected to be close to 2 percent in 2020 and 2021.

Lowe said the outlook for the Australian economy is little changed from three months ago. RBA forecast economic growth of around 2.25 percent in 2019 before gradually picking up to 3 percent in 2021.

The central bank is set to release its quarterly growth forecast on November 8.

The RBA's optimistic forecasts for GDP growth and the labor market will soon face a reality check and the Bank will have to ease policy by more than most anticipate, Marcel Thieliant, an economist at Capital Economics, said.

The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices in some markets and a brighter outlook for the resources sector should all support growth, Lowe said.

The main domestic uncertainty continues to be the outlook for consumption, the governor noted.

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