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MNI PREVIEW: RBA To Leave Rate At 0.75% Despite Weak Retail

By Lachlan Colquhoun
     SYDNEY(MNI) - The Reserve Bank of Australia is expected to leave official
interest rates unchanged at a record low 0.75% at its meeting on Tuesday, after
today's retail sales figures showed little impact from its three cuts so far
this year.
     The RBA cut in June, July and October, halving the Cash Rate in an attempt
to stimulate a faltering domestic economy. Governor Philip Lowe has said there
are signs of a "gentle recovery" in recent months.
     The RBA now says its main monetary policy goal is the creation of "full
employment" and unemployment rate ticked lower to 5.2% in September.
     Inflation last week showed ticked up to 1.7%, still outside of the Bank's
2% to 3% target range but finally moving in the right direction.
     The positives in the labour force and inflation data, however, were
undermined by disappointing retail sales data today, with a rise of only 0.2%
during September and a - 0.1% seasonally-adjusted decline during the third
quarter.
     So far, the biggest impact from the rate cuts has been in the housing
market, with house prices in the two biggest markets of Melbourne and Sydney
coming back strongly after steep falls, up 2.3% and 1.7% respectively in
October, according to private research.
     The RBA has welcomed the housing market recovery, saying that it could
translate into greater consumer confidence.
     With rates at 0.75%, the RBA will be aware that it now has limited room for
manoeuvre within the field of conventional monetary policy.
     More on the RBA's outlook will be revealed in the next Statement on
Monetary Policy, due this Friday.
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$,MX$$$$]

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