Interest rates will stay until the start of the next financial year after no change was made to the official cash rate at the Reserve Bank’s board meeting today.
The decision to make no change to the cash rate of 2% had been the expected outcome by the majority of observers after two straight cuts in February and May.
Home loan comparison website finder.com.au surveyed 34 experts in the lead up to today’s meeting, with all 34 predicting there would be no change to the rate.
Westpac chief economist Bill Evans doesn’t believe there will be a significant rate change until late this year.
“The Reserve Bank will now take time to assess the sustainability of their current forecast that economic growth in 2016 will exceed 3%,” he said.
“For our part, the next significant date will be the November board meeting.”
Evans is not alone in his prediction of a period of rate stability.
“We may even be looking at a period of rate stability until there is more certainty about the direction of the economy and unemployment in particular,” Peter Boehm from real estate website onthehouse.com.au said.
Reserve Bank Governor Glenn Stevens said the decision to keep the rate on hold was necessary as the current state of the economy requires accommodative monetary policy.
“In Australia, the available information suggests the economy has continued to grow, but at a rate somewhat below its longer-term average. Household spending has improved, including a large rise in dwelling construction, and exports are rising,” Stevens said in a statement after the board meeting.
“But a key drag on private demand is weakness in business capital expenditure in both the mining and non-mining sectors and this is likely to persist over the coming year.”
“Public spending is also scheduled to be subdued. Overall, the economy is likely to be operating with a degree of spare capacity for some time yet. With very slow growth in labour costs, inflation is forecast to remain consistent with the target over the next one to two years, even with a lower exchange rate.
“In such circumstances, monetary policy needs to be accommodative. Low interest rates are acting to support borrowing and spending.
“Credit is recording moderate growth overall, with stronger lending to businesses and growth in lending to the housing market broadly steady over recent months.
“Dwelling prices continue to rise strongly in Sydney, though trends have been more varied in a number of other cities.”
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