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No Melbourne Cup Day rate cut for RBA

07 November 2017

The interest rate has been at this level since September 2016.

Following its regular monthly meeting, the RBA left the official cash rate at 1.5 per cent, the same it has been since August previous year.

"Despite a clearly better global growth backdrop seeing a rebound of commodity prices since previous year, which provided a positive income shock for the Australian [economy], there still has not been a material rise in wages or CPI", said UBS. The central forecast was for GDP growth to pick up and to average around 3 percent over the next few years.

The RBA remained upbeat about the jobs market and observed that both employment and labour force participation have been rising, along with an improved outlook for non-mining investment.

Adding extra intrigue to today's statement, it arrives just days before the RBA will release updated forecasts for Australian economic growth, inflation and unemployment in its quarterly statement on monetary policy, providing an opportune time for the bank to soften the markets up for any potential changes that may occur.

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"One continuing source of uncertainty is the outlook for household consumption".

Royal Bank of Canada chief economist Su-Lin Ong said the RBA had, to some extent, played down recent economic data, including soft retail sales and lower than expected inflation.

Bill Evans at Westpac, said he doesn't expect that the need will arise to raise rates in 2018.

The emergence of inflation and GDP growth will be slower to emerge in Australia than in the broader global economy - and the RBA will take longer to lift interest rates compared to its peers, says UBS.