RBA holds cash rate once more

RBA holds cash rate once more

Posted on Tuesday, November 03 2015 at 2:48 PM

The Reserve Bank of Australia (RBA) has announced that it is holding the cash rate at 2.0 per cent for another month.

In his statement, governor Glenn Stevens said: “At today’s meeting the board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting. Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.”

CoreLogic RP Data’s Tim Lawless was unsurprised by the announcement.

“With the cash rate remaining on hold, and considering the recent 15 to 20 basis point lift to mortgage rates, the average discounted variable mortgage rate is likely to remain around the 4.8 to 4.85 per cent mark for owner-occupier mortgages, which is close to historic lows.  

“This should continue to provide a reasonable level of stimulus to the housing market.  

“While interest rates are important to the housing market, other factors are also at play in the recent abatement in the rate of capital growth. Investors are now paying close to a 30 basis point premium on their mortgages, rental yields have slipped to new record lows, housing supply is moving through record peaks and affordability challenges are very much apparent in Sydney and to a lesser extent Melbourne,” he adds.

Peter Esho, chief market analyst with brokerage firm Invast Australia, expects the RBA to cut interest rates before the year’s end.

“I think if the Aussie dollar does move towards the mid US70 cent range (where there is resistance), the RBA will step in and go another 25 basis points,” he says.

“They need to maintain an element of surprise and even though the recent minutes didn’t indicate an imminent cut, a November cut probably has a higher chance than the market is signalling and I would be a seller of the Aussie dollar anywhere above the US73 cent range.”
Domain’s Andrew Wilson also believes the year could still see another cut, saying: “Prospects are increasing for a near-term rate cut.”

Real Estate Institute of New South Wales president Malcolm Gunning sys: “Sale prices have flattened out and we’re seeing a change in the market, which favours buyers rather than sellers,” adding: “We expect this to continue to the end of the year and beyond.”

The official cash rate has fallen 275 basis points since November 2011, with the RBA cutting interest rates twice in 2013 in May and August and at its February and May meetings this year. 

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