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RBA keeps cash rate at historic low for 2017

RBA keeps cash rate at historic low for 2017

The Reserve Bank of Australia kept the official cash rate at 1.5% after its final board meeting of 2017.

The Reserve Bank of Australia (RBA) decided to leave the official cash rate on hold at 1.5% for the remainder of 2017 at its December board meeting.

RBA Governor Philip Lowe's statement was largely unchanged from previous months, although he did provide a summary of the year.

"Conditions in the global economy have improved over 2017," said Lowe. "Employment growth has been strong over 2017 and the unemployment rate has declined."

This sentiment was echoed by Craig James, Chief Economist at CommSec.

"The good news is that more people are employed, potentially adding more people with money to spend in the shopping malls around the company," said James

"It's important to note that economy-wide spending is lifting with business and governments playing bigger roles. Sales are at record highs and sales growth is the strongest in six years."

The last time the official cash rate moved was August 2016, when the RBA dropped it from 1.75% to 1.5%.

How did it impact the Australian dollar?

Prior to the rate announcement, the Australian dollar rose from 75.97 US cents early in the day to 76.44 US cents at 2.30pm (Sydney and Melbourne time). 

The quest to keep downward pressure on the Australian dollar appears to still play a part of the RBA's decision making, with Lowe speaking to it again in his statement.

"The Australian dollar remains within the range that it has been in over the past two years. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast," he said.

What can we expect?

The RBA board's next meeting will be in February.

"With inflation under control, rates are going nowhere. CommSec expects the next move in interest rates to be up, but not until later in 2018," James said. 

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. As the information on this page has been prepared without considering your objectives, financial situation or needs, you should, before acting on the information, consider its appropriateness to your circumstances. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Past performance is not an indication of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.