Forex - Aussie, Kiwi Move Lower; RBA Holds Rates

Forex - Aussie, Kiwi Move Lower; RBA Holds Rates

Forex - Aussie, Kiwi Move Lower; RBA Holds Rates

Governor Philip Lowe said while the outlook for the overall economy was still positive, partly because of public infrastructure spending, there were issues around the household sector.

The Reserve Bank has used its Melbourne Cup Day meeting to leave official interest rates on hold as it continues to hold out hope wages will finally pick up. However, outlook for household consumption continues to remain a source of uncertainty.

An AAP survey of 13 economists shows all are confident the central bank will leave the cash rate steady at a record low of 1.5 per cent at its November board meeting on Tuesday. "Household incomes are growing slowly and debt levels are high", it said.

Still, a more benign inflation outlook would signal the RBA is prepared to remain sidelined well into 2018, and potentially for some time beyond, resisting the lead of overseas central banks, economists warned.

The bank repeated that an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than now forecast.

"Given the recent developments, this discussion was not as dovish as it could have been", she said.

Capital Economics' economist Paul Dales said if GDP growth and underlying inflation stay below 3 percent and 2 percent respectively next year, then the RBA probably won't raise interest rates until late in 2019.

The RBA also looked at the Australian dollar appreciating since mid-year, and a higher exchange rate as a factor contributing to subdued price pressures in the economy.

While the labour market has seen improvement, with employment rising in all states, wage growth is expected to remain low for some time yet.

The Australian dollar rose to a two-day high of 76.95 USA cents following the RBA's rate announcement, though quickly fell back and ended the local session at 76.80 U.S. cents.

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