RBA holds rates for third month

RBA holds rates for third month

The Reserve Bank of Australia has announced the result of its monthly board meeting amid an overheated property market and patchy economic data.

 As expected, the Reserve Bank left the official cash rate at a record low of 2.0 per cent for the third consecutive month.

Of the 28 economists and commentators surveyed by Bloomberg about the August policy meeting, three predicted a cut to 1.75 per cent.

The ANU's Centre for Applied Macroeconomics Analysis (CAMA) RBA Shadow Board noted there is "little new domestic data to guide the RBA this month".

"A Greek debt default and exit from the Euro have been averted, while the rout of the Chinese stock market continues," said the Shadow Board in its August statement.

"Official inflation equals 1.5 per cent, well below the RBA's target band. The CAMA RBA Shadow Board on balance prefers to hold firm. It attaches only a small probability to the need for a rate cut."

AMP chief economist Shane Oliver said not enough has changed since the RBA's last meeting to justify a rate cut.

"There is not a national housing bubble, but there is one in Sydney and it will start to reverse in 2017," Mr Oliver said.

"House prices generally are likely to fall (probably only 5-10 per cent) around 2017 when or if interest rates start to rise," he said.

On the subject of house prices, Westpac chief economist Bill Evans said there is no evidence that the regulators' (the RBA's and APRA's) "greater scrutiny of investor housing" is affecting growth.

"We are currently looking for some modest improvement in growth in 2016 back towards around 3 per cent, a level that would likely maintain steady rates," Mr Evans said.

"Accordingly we maintain our call that rates will remain on hold over the course of 2015 and 2016," he said.

RBA holds rates for third month
ifa logo
promoted stories

SUBSCRIBE TO THE IFA DAILY BULLETIN

News

Business Strategy