RBA forecasts low interest rates to continue

The Reserve Bank of Australia has confirmed the popular view that interest rates will remain at record lows for the foreseeable future.

The board agreed at its recent monthly meeting that the 2.5 per cent cash rate was “likely to be appropriate for some time yet”, according to the minutes released yesterday.

That decision was based partly on Australia’s below-trend economic growth and sustainable inflation rate, according to the minutes.

It was also noted that domestic and global economic conditions had changed little since the May meeting.

Meanwhile, assistant governor Christopher Kent said in a speech this week that rising demand for labour would drive an increase in real wages.

“Some forward-looking indicators [for labour] are higher than they have been, though they are still at levels consistent with only moderate employment growth in the next few months,” he said.

“The bank's latest forecasts are for employment growth to pick up gradually over the next two years.

“The unemployment rate is expected to remain elevated over that period, declining from later in 2015 when we anticipate GDP growth to be picking up to an above-trend pace.”

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