RBA reveals monthly cash rate call

The central bank has announced how it will proceed with the official cash rate this month, at the conclusion of its board meeting this afternoon.

As widely expected, the RBA kept the cash rate on hold today at 1.5 per cent. 

CoreLogic head of research Tim Lawless said the housing market would have formed a key part of the RBA’s decision.

“Capital city dwelling values have increased by almost 10 per cent since the latest round of rate cuts in May and August last year, led by gains of around 13 per cent in Sydney and Melbourne,” said Mr Lawless.

Since the latest round of rate cuts, Mr Lawless said inflation has edged higher, with headline inflation moving back into the RBA’s target range of 2 per cent to 3 per cent for the first time since the September 2014 quarter.

“However inflation increases were driven largely by forces that are exogenous to domestic demand, including a 6 per cent increase in the price of fuel, and a 2.5 per cent administered increase in electricity prices,” he said.

“Coupled with continued low wage growth, this indicates that private and household demand may still be weak despite the higher inflation figures, warranting the maintenance of a low cash rate.”

ABC Bullion chief economist Jordan Eliseo said the RBA remains in no rush to cut interest rates despite the fact that most economic data has been soft, and inflation remains well controlled.

“Financial stability concerns are still a factor, though we remain of the view that there is more downside to come for rates in the next 12 months,” said Mr Eliseo.

AMP chief economist Shane Oliver said worries about excessive home prices and debt growth prevent a cut, low but “low underlying inflation and wages growth prevent a hike”.

 

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