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Rates on hold

By webmaster
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The current mildly restrictive stance of monetary policy remains "appropriate", the Reserve Bank has claimed.

At its monthly board meeting today, the Reserve Bank decided it was prudent to leave the cash rate on hold at 4.75 per cent for the seventh consecutive month.

The announcement comes as no surprise, with many industry commentators now expecting the cash rate to remain stable for the rest of 2011.

Yesterday, ANZ’s head of Australian economics and property research Ivan Colhoun said he expects the next increase to come in February 2012.

And he is not alone in his prediction.

RP Data’s national research director Tim Lawless told Smart Property Investment that rates would continue to stay on hold until inflation got out of hand.

“The RBA is well aware that the Australian housing market is finely balanced.  Based on the RP Data – Rismark Home Value Index, capital city home values are down 2.7 per cent since the start of 2011 and transaction volumes are tracking about 22 per cent below the five year average in April.  Clearly consumers are very interest rate sensitive which is also reflected in the low retail spending figures."

Coupled with a weak housing market and sluggish retail conditions, we are seeing dwelling approvals remaining low and consumers continue to focus on saving rather than spending.  Unless we see a runaway inflation figure for the June quarter, which will be available at the end of July in time for the RBA’s August meeting, rates will remain at the current level,” he said.

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