RBA decision may reflect property concerns

The Reserve Bank’s decision to leave the cash rate unchanged yesterday could signal its concern about rising property prices, according to a senior investment manager.

At its monthly meeting yesterday, the RBA board decided to leave the cash rate unchanged at 2.25 per cent.

“The RBA’s decision to leave rates unchanged after cutting at their first meeting of the year may reflect concern about the heat that is returning to the housing market,” Aberdeen Asset Management senior investment manager Jasmin Argyrou said.

“Another rate cut will eventually be needed to cushion the economy from a slowdown in mining investment and sluggish non-resources sectors.

“Low inflation here and overseas will make the decision easier when the time comes.”

In a statement yesterday, RBA governor Glen Stevens noted that credit is recording moderate growth overall, with stronger growth in lending to investors in housing assets.

“Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities over recent months,” Mr Stevens said in the statement.

“The bank is working with other regulators to assess and contain risks that may arise from the housing market.

“In other asset markets, prices for equities and commercial property have risen, in part as a result of declining long-term interest rates.”

Having eased monetary policy at its February meeting, the RBA decided it was appropriate to hold interest rates steady for the time being but admitted that further easing of policy may be appropriate subsequently.

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