RBA keeps official cash rate on hold at 2.0%, pointing to increased uncertainty

The Reserve Bank of Australia kept the official cash rate unchanged at a record low for a fifth month in a row, pointing to increased uncertainty surrounding the global economic outlook due to slowdown in China and east Asia. The Board decided to leave the cash rate at 2.0%. The central bank said that a moderate expansion continued in Australia, even though growth had been somewhat below longer-term averages for some time. Yet, economic expansion was accompanied with stronger growth of employment and a stable rate of joblessness over the past year. The RBA admitted that the nation's economy was set to operate with a degree of spare capacity for some time yet, with domestic inflationary pressures subdued. Inflation was estimated to remain consistent with the target over the next one to two years, even with a lower exchange rate. Most economists expected the RBA to remain on hold well into next year, while markets are pricing in a 65% chance of a cut below the current 2%, taking the interest rate to a new record low of 1.5%. Meanwhile, Australia's trade deficit widened in August to A$3.1 billion, compared with a forecast for a deficit of A$2.4 billion. Total exports came in at A$26.5 billion, while and total imports at A$29.6 billion.