RBA cash rate decision

The Reserve Bank of Australia has announced the result of its monthly board meeting to a backdrop of record house price growth and restricted lending policies.

As was widely expected, the central bank today resolved to leave the cash rate at its current record low of 2.00 per cent.

This reflects the unanimous predictions of finder.com.au’s panel of experts – that there would be no cash rate rise in August.

All 31 experts made the correct prediction, with 55 per cent indicating that they anticipated a rise in rates in 2016.

The decision to leave rates on hold represents a ‘safe’ choice by the RBA, according to LJ Hooker chief executive Grant Harrod.

Mr Harrod believes that lowering rates might be counterproductive to the recently announced changes to investor lending aimed at curbing record house price growth on the east coast, while raising rates would be out of step with the broader economy.

“I just don’t think there is enough compelling reasons for a reduction whilst it would be favourable for markets outside of Sydney,” Mr Harrod said.

“A rise at this stage is also not justified with latest economic figures and with consumer sentiment being a bit depressed, I think the safe haven for the RBA is to just stay where they are at.”

ING Direct treasurer Michael Witts believes that the softening Australian dollar has given the RBA more time to see how the economy is tracking before announcing any changes to the cash rate.

“The exchange rate has started to move lower and this will lessen the pressure for further Reserve Bank cuts for the moment as broader sectors of the economy benefit from the lower exchange rate,” he said.

Peter Boehm from onthehouse.com.au said, prior to today’s meeting, that he would’ve been ‘very surprised’ to see the cash rate move in either direction in August.

“It’s too early to start increasing rates and I cannot see the economic or financial justification for further rate cuts at this point. I think we'll see some interest rate stability over the coming months,” Mr Boehm said.

RBA cash rate decision
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