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Reserve Bank makes cash rate announcement

by Staff Reporter10 minute read

The Reserve Bank of Australia has announced the outcome of its monthly board meeting.

The official cash rate was left at a record-low 2.5 per cent for the 11th consecutive month, as most experts had forecast.

All 18 economists surveyed by comparison website finder.com.au had forecast that rates would remain on hold.

RP Data research director Tim Lawless said the Reserve Bank’s decision had been influenced by conditions in the Australian property market.

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“RP Data recently reported that dwelling values were down 0.2 per cent over the June quarter, dragged down by a very weak May result and a partial recovery of values in June,” he said.

“Policymakers, including the Reserve Bank, are likely to be reassured by the slowdown in housing market conditions, where the rate of growth earlier in the year was increasingly viewed as unsustainable.”

ANZ chief economist Warren Hogan told the finder.com.au survey that the economy had been playing out as expected for the Reserve Bank.

“We're seeing non-mining activity continue to improve and we're seeing job creation, so essentially monetary policy is set to remain on hold for an extended period of time,” he said.

RAMS head of product & digital Nathan McMullen, who also responded to the survey, forecast that the Reserve Bank would keep the cash rate at 2.5 per cent until the second half of 2015.

“Monetary policy settings remain mildly expansionary relative to long-run averages and are appropriate given the current outlook for inflation, unemployment, patchier consumer sentiment and some signs of a slowdown in housing,” he said.

ING DIRECT head of treasury Michael Witts told finder.com.au that it was difficult to guess the direction and timing of the Reserve Bank’s next move.

“Equally compelling scenarios can be constructed to support both an increase and a decrease in the cash rate,” he said.

Meanwhile, ME Bank’s general manager of markets, John Caelli, forecast that the Reserve Bank would hold its fire for the rest of the year and then lift rates in the first half of 2015.

“Growth remains moderate and consumer confidence has taken a hit following the federal Budget. The uncertainty over the Budget process will cloud the outlook for a period of time,” he said.

Loan Market director Mark De Martino added that the low cash rate was helping lift consumer confidence while keeping inflation within the RBA’s targeted range.

“The low interest rates of the past year have been great for consumers either looking to get into the property market or pay lower interest rates on their existing mortgages,” he said.

[Related: Why cheaper mortgages could cost borrowers dear]

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