Reserve Bank of Australia (RBA) Governor Glenn Stevens has seemingly put to bed any speculation that next Tuesday’s board meeting could end with a lowering of the official cash interest rate.
With the cash rate currently sitting at 2%, there had been some talk the December meeting could result in the first rate cut since May, but comments made by Stevens this week now make that seem like an unlikely outcome.
According to reports in Fairfax media, when asked at the Australian Business Economists Annual Dinner if the RBA hasn’t cut the official cash rate because it believed economic growth was showing signs of speeding up or because they were wary of the impact it would have on incomes of retirees who lived off interest, Stevens responded "You are making the case for us to sit still.”
"It is an idea I happen to agree with,” he said.
While Stevens did not explicitly rule out a rate cut, saying his “more than content” to lower rates if the situation called for it, Philippe Brach, chief executive officer of Multifocus Properties & Finance, believes his comments have effectively taken a rate cut off the table for the time being.
“Absolutely, he’s very clearly said it’s time for everybody to just chill out a bit and wait to see what happens in February,” Brach said.
“Even in February it’s hard to see anything happening. I think we’re going to see a stalemate for a while,” he said.
That stalemate could be bad news for borrowers, with Brach believing they would have gotten at least some benefit had the RBA made a cut.
“I think there would be some of it passed on to borrowers. We wouldn’t see it all passed on. The lenders would come up with some reason not to.”
Though he believes existing borrowers would benefit from a downward move by the RBA, Brach doesn’t believe any such move would result in a sudden increase of investment activity.
“I’m not convinced that would happen. We’ve already had quite a lot of rate cuts and they have less of an impact as rates get lower.
“I think at the moment it’s cheap enough for people to do it if they want, so I don’t think a cut is going to spur on any activity.”
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