No Change to RBA Cash Rate

October 4, 2016

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

 
In a widely anticipated result, the RBA has today opted to hold the official cash rate at its record low of 1.50 per cent for another month.

All 38 experts and economists surveyed by finder.com.au tipped the board members to keep the status quo unchanged, and it did.

Many of the experts said it is a matter of “so far so good” for the RBA, adding there appears to be increasing RBA scepticism about the overall effectiveness of further rate cuts at this time.

BIS Shrapnel’s Richard Robinson said there is no need to cut rates when unemployment rate is steady, and economic growth is also currently sufficient to keep it steady. “Plus, the RBA needs to let [the] housing market cool further,” Mr Robinson said.

But many of the experts are predicting a rate cut later this year, or early next.

HIA economist Shane Garrett said given that economic growth is moving in the right direction, the RBA will “wait and see” how August’s rate cut pans out before making another. More directly, Raine & Horne executive chairman, Angus Raine, said the rate cut will likely be before Christmas.

Both Domain senior economist, Andrew Wilson, and Laing+Simmons MD, Leanne Pilkington, forecast the next cut would not be before Q2, 2017.

Mr Wilson also said the RBA will be monitoring the impact of the August’s cut, as well as waiting for the release of next month’s inflation data. “[It] will be also alert to recent sharp house price increases in Sydney and Melbourne.”

In making her prediction, Ms Pilkington cited recent reports about the overall Australian housing market cooling and Sydney, in particular, ranking among the most at risk globally of a housing bubble. “But the reality is much less dramatic,” she said, adding the RBA leaving interest rates unchanged today is appropriate.

 

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