Entire year of steady rate for first time in a decade

Entire year of steady rate for first time in a decade

Posted on Tuesday, December 02 2014 at 2:30 PM

In its final announcement for 2014, the Reserve Bank of Australia (RBA) has today announced that there will be no change to the official cash rate this year, keeping it at 2.5 per cent for the 15th meeting in a row.

governor Glenn Stevens said at the Monetary Policy Decision meeting in Sydney:
“While weakening property markets present a challenge in the near term,
economic policies have been responding in a way that should support growth.”

went on to report that global financial conditions remain accommodative and
long-term interest rates and risk spreads remain low.

the Bank still expects growth to be a little below trend for the next several
quarters,” he said. “Inflation is running between two and three per cent, as expected, with recent data
confirming subdued rises in labour costs. Although some forward indicators of
employment have been firming this year, the unemployment rate has edged

that dwelling prices have continued to rise and the exchange rate has been
trading lower recently, he concluded: “The most prudent course is likely to be
a period of stability in interest rates.”

Reacting to the announcement, CoreLogic RP Data
research analyst Cameron Kusher said: “With
home value growth continuing to moderate in November and dwelling and work
approvals recently slipping, there may be some concern that the housing market
alone is not providing enough economic stimulus as the mining and resources
investment activity subsides and commodity prices fall. Nevertheless the
RBA has again kept official interest rates on hold this month.”

Industry Association chief economist Harley Dale said: “The odds are shortening
on Australia experiencing its longest period of interest rate stability in
modern history.

would reach that milestone in March next year and today’s RBA statement
strongly points toward that outcome.”

went on: “In reflection of the uncertain and challenging economic environment
we face, steady interest rates would more likely be interrupted in the short-term
by a further reduction rather than an interest rate hike, although there is no
hint from the RBA that such action is in prospect.”

concluded: “We’ve just seen an impressive update for ABS building approvals
supportive of very elevated levels of new home construction persisting into
next year. However, approvals have effectively tracked sideways through most of
2014. New home building taking a further step up will require policy makers to
step in and undertake significant reform, not sit back and expect record low
borrowing costs to generate a fresh round of upward momentum.”

next rate decision will take place in February 2015, after a break in January. 

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