RBA makes call on cash rate

RBA makes call on cash rate

The board of the Reserve Bank of Australia has elected to keep the cash rate on hold at 1.50 per cent at its September meeting.

This decision marks the 13th consecutive month the RBA board has held the cash rate steady, with rates currently caught between “a rock and a hard place”, according to AMP Capital chief economist Shane Oliver.

“Strong business confidence and jobs growth, the RBA’s expectations for a growth pick up and worries about reigniting the Sydney and Melbourne property markets argue against a rate cut,” Mr Oliver said.

“But record low wages growth, low underlying inflation, the impending slowdown in housing construction, risks around the consumer and the rise in the Australian dollar argue against a rate hike, so it makes sense to leave rates on hold at 1.5 per cent, and this is likely to remain the case out to late next year at least.”

However, HSBC chief economist Paul Bloxham said the case for a hike was building and rates “should be lifted within the next six months” in response to improved corporate profitability, a pick-up in global growth and business conditions reaching decde-highs.

“While the current highly accommodative cash rate setting was needed to assist the economy to rebalance after the end of the mining boom, the mining retreat is near its end,” Mr Bloxham said.

The RBA’s decision was also in line with the ASX 30 Day Interbank Cash Rate Futures, which have been pricing in a 0 per cent chance of a change in the cash rate since at least 24 August.

 

RBA makes call on cash rate
ifa logo
promoted stories

SUBSCRIBE TO THE IFA DAILY BULLETIN

News

Business Strategy