RBA rate announcement

The Reserve Bank of Australia has announced the result of its monthly board meeting.

The official cash rate has been left at a record-low 2.5 per cent for the 14th consecutive month as most economists had predicted.

All 28 economists surveyed by comparison website finder.com.au had forecast that the cash rate would remain on hold.

AMP Capital chief economist Shane Oliver told finder.com.au that the housing market was too strong for the official cash rate to be cut while the economy was too fragile for it to be raised.

According to the finder.com.au survey, all 28 economists believe the Reserve Bank will lift the cash rate in 2015, with many expecting interest rates to then keep gradually increasing.

Financial Services Council chief economist James Bond said the Reserve Bank would wait to see how the employment trend settles over the coming months.

“The RBA board will be pleased with the fall in the Australian dollar, and should the currency persist at a lower level, this will give the bank the capacity to raise rates earlier to take the heat out of the housing market,” he said.

ING Direct’s head of treasury, Michael Witts, said the Reserve Bank would be reluctant to increase the cash rate until the Australian dollar dropped well under US$0.90.

Mortgage Choice spokesperson Jessica Darnbrough said the cash rate would remain at 2.5 per cent for the foreseeable future.

“While the Reserve Bank has made it clear in recent weeks that something needs to be done to cool the property market, with consumer sentiment down and property price growth easing, it is now unlikely that the board will cool the property market by raising the cash rate anytime soon,” she said.

 

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