RBA interest rates kept at record low


The Reserve Bank of Australia has opted to keep the country’s official interest cash rate at 1.5 per cent for a record 29th month.

The interest rate has not changed from the historic low since it was shifted down from 1.75 per cent in August 2016.

“The RBA has looked past the housing downturn which has gathered some momentum over the past three months, to hold the cash rate firm at their first meeting this year,” Corelogic head of research Tim Lawless said.

(AAP)

“The hold decision was widely anticipated, considering a subtle uplift in CPI and steady labour market conditions, however financial markets are increasingly leaning towards the next move from the RBA being a cut rather than a hike.”

Mr Lawless warned that a rapidly falling housing market, softer retail trade figures and weakening consumer sentiment all pointed to the household sector dragging down economic growth.

CoreLogic’s latest data reveals national housing values are falling faster than anytime since the global financial crisis, and the rate of decline in Sydney and Melbourne values was the highest since the 1980s.

(AAP)

“The weeks preceding the RBA meeting saw several smaller lenders pushing mortgage rates higher in response to persistently high funding costs, following an average 14 basis point rise in owner occupier mortgage rates since September last year,” Mr Lawless said.

“If we see mortgage rates rising more broadly, we might see the RBA become more willing to consider a rate cut in an effort to offset higher funding costs and support heavily indebted household balance sheets.”

RBA governor Philip Lowe said the low level of interest rates was continuing to support the economy.

“Further progress in reducing unemployment and having inflation return to target is expected, although this progress is likely to be gradual,” he said.

“Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.”

In a statement announcing the decision, he pointed to a low level of inflation, a strong labour market with unemployment at five percent and expected to fall, and the “adjustment” experienced by the Sydney and Melbourne housing markets, as key factors.

“The central scenario is for the Australian economy to grow by around three per cent this year and by a little less in 2020 due to slower growth in exports of resources,” Mr Lowe said.

“The growth outlook is being supported by rising business investment and higher levels of spending on public infrastructure.”

 



Source link Finance News Australia

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