RBA leaves cash rate on hold

RBA leaves cash rate on hold

The Reserve Bank of Australia has announced the result of its monthly board meeting, its first since the big four banks raised their mortgage rates.

The board decided to leave the official cash rate at 2 per cent as most analysts had predicted.

While all four major banks raised their owner-occupier rates last month, 24 of the 30 economists and commentators surveyed by finder.com.au had expected the cash rate to remain on hold. The other six forecast a rate cut.

Another rate cut would also provide a boost to Australia's sluggish economy.

One reason some analysts had thought another rate cut was unlikely was that it would exacerbate housing booms in Sydney and Melbourne.

However, the RBA could now have room to move, with Sydney's boom apparently at an end, and a significant slowdown forecast for Melbourne.

The outlook on inflation is also supportive – the inflation rate is running at 1.5 per cent, which is well below the RBA's target band of 2-3 per cent.

Domain Group senior economist Andrew Wilson told finder.com.au that reducing the cash rate would offset the tightening effect of last month's mortgage rate rises and would help spur Christmas retail activity.

RBA leaves cash rate on hold
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