The US mid-term elections were the main focus for markets last week with both Republicans and Democrats claiming a victory. In other news, monetary policy also remained in view, with the RBA, RBNZ and US Federal Reserve all meeting and leaving official rates unchanged.
The official cash rate in Australia has now remained unchanged at 1.50% for two years and three months, a new record.
The RBA’s post board meeting statement last week surprised markets with a more optimistic outlook. The Governor’s media release continued to state that “the low level of interest rates is continuing to support the Australian economy.” GDP growth has been revised up and “with the economy growing above trend, a further reduction in the unemployment rate is expected to around 4.75% in 2020”. Stronger growth and lower unemployment flowed through into the outlook for inflation, where the “central scenario is for inflation to be 2.25% in 2019 and a bit higher in the following year.”
Despite all this upbeat talk however, markets still don’t see the cash rate moving from 1.50% any time soon.