Australia central bank holds rates at 1.5%, signals rate cut

[SYDNEY] Australia central bank left interest rates on hold Thursday, brushing off calls for a cut to protect the country's 27-year recession-free run, with officials saying the economy was still in "reasonable" shape despite weak inflation and wage growth.

Keeping the cash rate at a record low 1.5 per cent, the Reserve Bank of Australia signalled that it could cut at upcoming meetings if the labour market does not improve.

"A further improvement in the labour market was likely to be needed for inflation to be consistent with the target," the bank said in its statement.

"Given this assessment, the Board will be paying close attention to developments in the labour market at its upcoming meetings."

The decision came in the midst of an election campaign that could have been upended by a cut.

The ruling Liberal party has anchored its campaign on its custodianship of an economy that - while slowing - has grown consistently.

Any cut would have significantly undermined Prime Minister Scott Morrison's case.

The Australian dollar strengthened and the stock market fell slightly on the decision.

"Weaker GDP growth and a cratering in first-quarter inflation in Australia raised expectations" of a cut, said Michael McCarthy, the chief market strategist at CMC.

AFP