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RBA releases cash rate decision

By Staff Reporter
RBA releases cash rate decision

The Reserve Bank of Australia has delivered the decision of its final monthly board meeting of the year.

In a widely-anticipated move, the RBA today decided to hold the official cash rate at its record low of 1.50 per cent.

All 75 of the industry experts surveyed by mortgage comparison site finder.com.au predicted that there would be no change to the rate today, as many believed that there were not enough reasons to warrant the RBA to make a move.

“There is no imperative for the RBA to change rates at the moment. The RBA and the rest of the world is watching the United States, particularly in relation to changes in that country’s interest rates,” Greater Bank CEO Scott Morgan said.

ING DIRECT’s head of treasury Michael Witts echoed this sentiment.

“The global interest rate outlook has moved sharply towards higher interest rates following the US election. Against this background and solid domestic economy, the RBA will be on hold for an extended period,” he said.

Meanwhile, GriffithGriffith, ACT Griffith, NSW University Business School’s Mark Brimble said the Reserve Bank is likely to “sit on the sidelines” in the hope that consumers will spend over the festive season and boost the economy.

Many commentators believe that if the RBA is to move again, it will take place next year. Some say it could happen as early as the first RBA meeting of the year in February.

“By this time, the RBA will have had time to consider the performance of the housing market over the final quarter of 2016, as well as GDP figures for September and inflation numbers for the December quarter,” CoreLogic head of research Tim Lawless said.

“Additionally, there will be further clarity on the US economy where unemployment has reached a nine-year low and interest rates are about to start ratcheting higher.”

Mr Lawless said a decision to cut the cash rate to new record lows could add fuel to housing activity among investors and owner occupiers, which could in turn “push housing values even higher” in 2017.

Mortgage Choice CEO John Flavell concurred, saying, “When you look at the latest economic data, there was no reason for the Reserve Bank to change its current stance on monetary policy… But while the Reserve Bank decided to leave the cash rate on hold in December, it is likely that future rate increases are just around the corner.”

“There is growing speculation that the United States’ Federal Reserve will lift the official cash rate at its next board meeting on December 14. If this happens, we could see the Reserve Bank follow suit and lift rates as early as February 2017,” Mr Flavell said.

“Increases in long-term bond rates further support the theory that interest rates could soon rise. If people have been waiting for the bottom of the rate cycle, it may well have already passed.”

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RBA releases cash rate decision
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