Australia's Central Bank Induces Global Risks

The Reserve Bank of Australia (RBA) sustained the interest rates at a record low for 23 consecutive months on Tuesday, indicating weakened inflation and wages at home with a risk of global growth from trade policy in the United States.

Previous cut rates of the central bank were 1.50 percent in August 2016, making it the longest run without change since the change in formalized cash rate in 1990. It indicates every sign of the process being expanded.

Employment reduction is ongoing and inflation returns to the anticipated target, which shows gradual progress, according to RBA Governor Philip Lowe after the bank’s monthly policy meeting.

Inflation remains strongly below the floor of 2-3 percent target band and wages failed to recover despite solid job gains, where “Gradual” became a significant term.

There is another risk concerning the tariff implementation from the U.S. President Donald Trump against Europe and China, where Australia’s single biggest export market on the latter.

The global perspective is relative to the course of international trade policy in the United States, according to Lowe which is expectedly underrated.

A probable trade war is the biggest single external threat to Australia’s prosperity due to a potential trade war. The two-way trade accounts for 45 percent of Australia’s annual gross domestic product (GDP).

A Reuters poll of 34 analysts anticipates the cash rate to remain unchanged this week. Compared to mid-year in the previous poll, the increase was not anticipated prior to the July quarter of 2019.