Originally published by AMP Capital
As widely expected, the May RBA Board meeting saw it leave interest rates on hold for a record 19 meetings or 21 months.
In doing so it made little change to its post meeting statement, except to acknowledge the tightening in US and Australian money markets (which has actually started to unwind a bit), the rise in the price of oil and the recent decline in the Australian dollar and a return to expecting growth this year and next to be a little above 3%. However, there was nothing here to suggest an imminent change in monetary policy.
While the global backdrop, business conditions, non-mining investment and infrastructure activity are positive and will lead to some acceleration in growth, uncertainty remains around the outlook for consumer spending, household debt is high, banks are tightening lending standards, wage growth and inflation remain low and will pick only gradually and house prices are falling.
As a result, the RBA is likely to remain on hold for a long time yet and we don’t see a rate hike until 2020 at the earliest.