As was widely expected the Reserve Bank of Australia has held the cash rate steady at the record low of 1.5% for another month.
Today’s decision means that the central bank has now kept rates on hold for 26 months in a row.
What did the Reserve Bank say?
There was no real change to Governor Lowe’s statement. He stated that:
“The global economic expansion is continuing. A number of advanced economies are growing at an above-trend rate and unemployment rates are low. Growth in China has slowed a little, with the authorities easing policy while continuing to pay close attention to the risks in the financial sector. Globally, inflation remains low, although it has increased due to both higher oil prices and some lift in wages growth. A further pick-up in inflation is expected given the tight labour markets, and in the United States, the sizeable fiscal stimulus. One ongoing uncertainty regarding the global outlook stems from the direction of international trade policy in the United States.”
Before adding that: “Inflation is around 2 per cent. The central forecast is for inflation to be higher in 2019 and 2020 than it is currently.”
The central bank appeared to be reasonably pleased with the labour market, advising that the outlook for the market remains positive. And while wages growth remains lower, it expects “the improvement in the economy should see some further lift in wages growth over time, although this is likely to be a gradual process.”
Once again he finished by advising that the low level of interest rates is continuing to support the Australian economy and that gradual progress in reducing unemployment and having inflation return to target is expected.
While 26 months may seem like a long time to keep rates on hold, one leading bank’s economics team expects this to stretch to over 50 weeks.
According to the latest Westpac Banking Corp (ASX: WBC) Weekly economic report, its economics team has forecast the cash rate remaining at 1.5% until at least December 2020.
While this would be a positive for borrowers, it is disappointing for savers who will have to contend with low rates on interest-bearing financial assets for some time to come.
The good news, though, is that the Australian share market has some great dividend options that can ease the blow.
For example, the shares of computer hardware and software distributor Dicker Data Ltd (ASX: DDR), rural property manager Rural Funds Group (ASX: RFF), and retail conglomerate Super Retail Group Ltd (ASX: SUL) all offer above-average and growing dividends.
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Motley Fool contributor James Mickleboro owns shares of Westpac Banking. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited and RURALFUNDS STAPLED. The Motley Fool Australia owns shares of Super Retail Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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