The RBA has decided to put the cash rate on hold again for the third consecutive month.
The official cash rate has been left at 2.5% at the Board’s meeting this afternoon.
The November RBA decision has historically seen rate changes announced—over the past ten years, there have been five rate rises and three rate cuts announced at the November decision.
Yesterday the ASX RBA Rate Indicator put the chance of the cash rate being left unchanged at 95%.
The general consensus among many of Australia’s top economists and commentators is that there’ll be no more cuts for 2013, but that rates could be raised later next year.
Savanth Sebastian of Commsec said mid-2014 might mark a return to a higher cash rate.
‘It really looks like we've hit the low point in the cycle for rates, it's more now just a matter of now when they potentially look at discussing rate hikes,’ Mr Sebastian said.
‘I don't think they'll certainly raise higher rates in the first half of the year, but if the current trend continues they'll certainly be discussing the potential for rate hikes in the second half of 2014.’
Shane Oliver of AMP, in his monthly forecast, said the cash rate will be hiked in September or October and said that recent inflation figures would have a bearing on the RBA’s decision this month.
‘It's quite clear that the housing market has picked up and more importantly that's flowing on to indicators for housing construction, consumer and business confidence and also a couple weeks back we saw some higher than expected inflation numbers in Australia,’ He said.
Of the eight economists finder.com.au surveyed, each of them correctly forecast rates would remain at the record low 2.5%.
Some economists, like NAB’s Alan Oster, believe another rate cut will come in February 2014, while others like HSBC’s Paul Bloxham and St.George’s Janu Chan believe the RBA’s rate cutting cycle is done for now.
Michael Witts - ING Direct
"ING Direct expects the RBA to keep rates unchanged at the November meeting. A broad range of indicators suggest that the flow on effects of past rates cuts are working their way through the economy with increased momentum. Against this background it appears increasingly likely the RBA will be on hold for an extended period. The RBA has recently commented on the higher level of activity in the housing market. The Bank is closely watching this segment for inflated price moves, although these moves are generally localised within markets. The RBA has stated that they would prefer to see a lower exchange rate perhaps closer towards 90 cents from the current level of above 95 cents.
What does this mean for homeowners?
Michelle Hutchison, finder.com.au spokesperson, said that even if the RBA isn’t forecast to give anymore cuts for 2013, good savings can still be found in a fixed rate.
"Fixed interest rates are still much lower than the past, despite some lenders increasing their rates recently. For instance, all four of the big banks' fixed rates are significantly lower than the past two years, so if you're considering fixing it's a good idea to compare deals right now. But don't panic and lock in the first fixed rate you see because we're not expecting significant increases too soon so there's still time to compare deals and find a good value loan.
"It's also worth comparing fixed loans with a rate lock guarantee so your fixed rate remains the same and won't increase during your settlement period."