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RBA leaves cash rate unchanged at 1.5%

RBA leaves cash rate unchanged at 1.5%

The Australian dollar fell briefly after the RBA made its call to leave the cash rate steady, but later rebounded to trade above 76 US cents.

The Reserve Bank of Australia (RBA) today kept the official cash rate on hold at 1.5% at its monthly board meeting, in line with market expectations.

Investors priced in only a 3% chance of a rate cut, according to the Australian Securities Exchange RBA Rate Indicator. The gauge, calculated according to prices in the ASX 30-Day Interbank Cash Rate Futures, showed that market expectations on the cash rate had been consistent since 28 February.

In his statement, which was largely unchanged from last month, RBA governor Philip Lowe said business and consumer confidence have picked up as conditions in the global economy continue to improve in recent months.

"The Australian economy is continuing its transition following the end of the mining investment boom, expanding by around 2.5% in 2016," he said.

"Exports have risen strongly and non-mining business investment has risen over the past year. Most measures of business and consumer confidence are at, or above, average." 

The Australian dollar briefly slipped to 75.96 US cents immediately following the RBA announcement at 2:30pm Sydney time, but rebounded to 76.22 US cents by 3:35pm.

The RBA has kept the cash rate at a historic low of 1.5% for seven consecutive months. The central bank last made a change to the cash rate in August 2016, when it reduced it by 25 basis points from 1.75%. 

"The outlook continues to be supported by the low level of interest rates," said Dr Lowe.

Craig James, chief economist at CommSec, pointed out that the RBA's neutral commentary means rate hikes are as likely as rate cuts in the upcoming months.

"The Reserve Bank has issued a very stodgy, balanced commentary on the economy. Some might say boring. But boring is good in the current environment," said James.

"Because the Reserve Bank certainly isn't suggesting that more stimulus needs to be applied to the economy. Nor do interest rates need to go up."

CommSec continues to expect no change to the cash rate this year.

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. Past performance is not an indication of future performance.