March cash rate decision announced

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Australia’s official cash interest rate will remain unchanged for another month, following the Reserve Bank of Australia’s decision to make no movement at yesterday's board meeting.

The decision means the cash rate will remain at 2% as the RBA closes in on a year without altering it, with the last rate movement being a 0.25% cut in May 2015.

The cash rate remained unchanged at 2.5% for a 17-month span over 2013-15, while the longest period of inactivity from the Central Bank was a 19-month stretch over 1994-96 when the cash rate sat at 7.5%.

Today’s decision is unlikely to surprise many, with all 31 experts involved in Finder’s monthly RBA Survey predicting there would be no movement from the RBA.

Many commentators, including LJ Hooker chief executive officer Grant Harrod, believe the RBA is keeping future rate movements up their sleeve as they wait to see how current economic conditions play out.

“Despite a slight increase in the unemployment rate, there are no clear signs that the Australian economy has deteriorated. This will see the Reserve Bank continue its wait and see approach,” Harrod said.

“Slower house price growth and low levels of inflation provide the Reserve Bank with enough room to cut rates should they need to stimulate growth during the first half of 2016,” he said.

Prominent independent economist Saul Eslake agreed with Harrod and said the RBA isn’t currently facing any pressing reason that would have warranted a rate movement at yesterday’s meeting.

“There is no good reason for the Reserve Bank to change the cash rate. Monetary policy is already highly accommodative; although the economy is growing at a below-trend pace, the unemployment rate has been falling of late and 'underlying' inflation is comfortably within the Reserve Bank's target band,” Eslake said.

“Although the ongoing turmoil on financial markets potentially represents a source of downside risk, there is as yet no evidence of that potential being realized and as the Reserve Bank has noted, they have scope to cut rates further should that prove necessary,” he said.
 

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