ibusinesslines.com July 20, 2018

RBA ends the year with a 'hold' on the cash rate

05 December 2017, 03:39 | Myron Mathis

RBA ends the year with a 'hold' on the cash rate

RBA ends the year with a 'hold' on the cash rate

Surprising no one, the RBA has once again made a decision to hold the cash rate at 1.5 per cent, a move that many have predicted.

Once again the RBA's result was correctly predicted by 100% of the experts polled in the monthly finder Reserve Bank Survey.

The Reserve Bank doesn't meet in January, so the bank will make its next cash rate decision on 6 February 2018.

Mortgage Choice's John Flavell said the decision to keep the rate on hold was indicative of a thriving economy.

CoreLogic head of research Tim Lawless said the slowing house market continued to ease concerns about the need to cut the cash rate, while inflation remains below the RBA's target range, resisting calls for an increase in the cash rate.

"Property price growth has stagnated across Australia, which is line with expectations". In addition, inflation is now sitting at 1.8% - slightly below the Reserve Bank's target band range of 2-3%.

Economists widely expect the Reserve Bank to leave the cash rate at a record-low 1.5 per cent, where it has stood since August 2016.

"The low level of interest rates is continuing to support the Australian economy", said Lowe. This effect is similar to a rate rise in some respects.

If rates were to rise - however imperceptibly - millions of Australian households paying off a mortgage would experience the pinch.

"Households are already clamping down on spending which is evident in the weak retail spending figures occurring against a backdrop of record low wages growth".

AMP chief economist Shane Oliver said strong business conditions and a high Australian dollar meant rates argued against a rate hike.

ABC Bullion chief economist Jordan Eliseo said he was confident there would be a rate cut on the horizon but believed the rate would hold going into the festive season.

"The RBA will be happy to sit tight as we approach Christmas and monitor incoming data".

The central bank is anxious about Australians' spending habits, as pay packets remain stubbornly stagnant and household debt high.

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