UPDATE: MNI: RBA Leaves Rates On Hold, Ups 2018, 2019 GDP View

--RBA Board Leaves OCR At 1.5%, Now Unchanged For Over Two Years

--Pick Up In Inflation Expected Given Tight Labour Markets

--Adds Paragraphs At End On Money Market Rates

By Lachlan Colquhoun

     LONDON (MNI) - The Reserve Bank of Australia left the official cash rate at

a record low 1.5% Tuesday, extending the unchanged run for the overnight Cash

Rate to more than two years.

     While the global economic expansion was "continuing", growth in China had

slowed and domestic inflation remained low, RBA Governor Philip Lowe said in a

statement accompanying the decision. 

     The RBA decision was widely expected by financial markets, largely due to

low inflation, although Lowe noted that a "further pick up in inflation is

expected given the tight labour markets."

     --GROWTH BOOST

     On the Australian domestic economy, the RBA Governor said that forecasts

for growth had been "revised up a little" for 2018 and 2019, with growth to

average 3.5% over the two years.

     The RBA is expected to focus on the declining unemployment rate, currently

at 5.0%, in the expectation that the labour market will tighten further,

boosting salaries and consumption and pushing inflation higher than the current

1.9%.

     The Bank has an inflation target of between 2 and 3%, and is expected to

wait for this to be achieved before moving to change its interest rate stance.

     --HEADWINDS

     There are still uncertainties on the horizon for the RBA, with trade a

concern. 

     "One ongoing uncertainty regarding the global outlook stems from the

direction of international trade policy in the United States," said Lowe.

     Domestically, while business conditions were "positive", the outlook for

household consumption was a "continued source of uncertainty", debt levels were

high and some asset prices had declined, Lowe said.

     --MONEY MARKETS

     Lowe also noted that financial conditions remained expansionary in advanced

economies, although they had tightened recently. Domestically, money-market

rates have declined recently, after increasing earlier in the year. 

     However, standard variable mortgage rates are a little higher than a few

months ago, he said, but rates charged to new borrowers for housing are

generally lower than for outstanding loans. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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