RBA cash rate decision - June 2014

The Reserve Bank of Australia has today announced the outcome of its fifth board meeting of the year.

As widely predicted, the RBA announced at 2.30pm today it will be keeping the cash rate on hold at 2.5 per cent.

“With the heat potentially coming out of the housing market, the RBA will find it much easier to keep interest rates at their low setting in an effort to continue stimulating housing construction and consumer spending,” said RP Data’s research director Tim Lawless.

“Add to the recently weak housing market a stubbornly high Australian dollar, lower commodity prices, slowing dwelling approvals and weaker consumer sentiment post budget and it’s clear that the RBA is likely to hold off on rate hikes for the foreseeable future,” Mr Lawless said.

A survey conducted by loan comparison website finder.com.au prior to the board meeting found 16 Australian economists unanimously predicted no cash rate change.

However, more than half of those surveyed predict the cash rate will rise next year. Five respondents from Commonwealth Bank, Commsec, Urbis, HSBC and St George Bank expect to see a cash rate rise by the end of the year.

Ten of the 16 participants suggested the public’s reaction to federal Budget cuts will delay the change in cash rate, with nine stating the economy still has to grow in stability before any significant cash rate changes occur.