As markets tumble, RBA keeps rates on hold at record low of 1.5 per cent

As markets tumble, RBA keeps rates on hold at record low of 1.5 per cent

As markets tumble, RBA keeps rates on hold at record low of 1.5 per cent

Updated 6 February 2018, 15:30 AEDT

After its traditional summer break, the RBA board returns with little change to its outlook.

The Reserve Bank has left official interest rates on hold at the record low of 1.5 per cent.

The stance was widely anticipated, with the futures market pricing in zero chance of a move and not one economist surveyed by the Bloomberg or Reuters news agencies forecasting a shift in policy from the bank.

If the uncertainty caused by the sudden capitulation on global equities markets was not enough, last week's weaker than expected inflation figures and today's poor retail and trade data certainly sealed the case against a rate hike.

Rates have been on hold since August 2016 when the RBA edged them down a notch to the current "emergency setting".

Reserve Bank governor Philip Lowe made no mention of the sudden deterioration on financial markets in his regular post-meeting statement, preferring to accentuate the positives such as the broad-based pick up in the global economy last year.

"A number of advanced economies are growing at an above-trend rate and unemployment rates are low," Mr Lowe said.

"The Chinese economy continues to grow solidly, with the authorities paying increased attention to the risks in the financial sector and the sustainability of growth."

Inflation, debt and low wages key worries

The bank is sticking to its central forecast for Australian GDP growth to pick up, to average a bit above 3 per cent over the next couple of years.

Dr Lowe said nothing had happened over summer to change his mind with business conditions positive and non-mining investment and infrastructure likely to support the economy.

However, low inflation and a spending strike by consumers continue to be stumbling blocks in the RBA's hopes to lift interest rates to more normal levels.

"Household incomes are growing slowly and debt levels are high," Dr Lowe noted.

"Inflation is likely to remain low for some time, reflecting low growth in labour costs and strong competition in retailing."

The RBA maintains CPI inflation will edge into its 2-3 per cent target band later this year.