The RBA says it will keep the official cash rate on hold at 1.5 per cent, as widely anticipated, for the eighth consecutive month.
“A rate cut [was] unlikely because economic growth has bounced back after its September quarter slump, the RBA expects that underlying inflation has bottomed and will gradually rise, and the Sydney and Melbourne property markets are uncomfortably hot, posing financial stability risk,” AMP chief economist Shane Oliver said.
With low inflation fears, a high Australian dollar, and unemployment and underemployment remaining at over 14 per cent combined, a rate hike was also out of the question.
Despite the Sydney and Melbourne property markets continuing to be of concern, they cannot dictate the cash rate decision with Australian economic growth still weak, Dr Oliver said.
“The best way to deal with the hot Sydney and Melbourne property markets and excessive growth in property investor lending into those markets is through tightening macroprudential standards, which APRA has again moved to do,” he said.
While the RBA will keep an eye on the housing market and underlying growth, many commentators expect the cash rate to remain on hold for the remainder of the year.