Reserve Bank leaves cash rate unchanged for October
The Reserve Bank of Australia (RBA) has again decided to leave rates unchanged at 2.50%.
Governor of the RBA Glenn Stevens said that although the dollar still remains below the highs seen last year—despite the recent rise last month—so further drops in the currency are needed.
"The Australian dollar rose recently, but is still about 10 per cent below its level in April. A lower level of the currency than seen at present would assist in rebalancing growth in the economy," he said in his statement.
The RBA’s minutes from their September decision showed the board's willingness to continue to monitor data such as the state of the Aussie dollar over the coming months, rather than make more rate cuts immediately.
Governor of the RBA Glenn Stevens said that although the dollar still remains below the highs seen last year, despite the recent rise, further drops in the currency are needed.
“Members agreed that the Bank should again neither close off the possibility of reducing rates further nor signal an imminent intention to reduce them,” the minutes read.
ASX 30 Day Interbank Cash Rate Futures yesterday put the chance of a rate cut today at 8%.
All of the economists interviewed this month as part of finder.com.au’s expert panel correctly forecast that the rate would hold at 2.50% today, but forecasts for the November decision were less uniform.
Will we get another cut?
HSBC’s Paul Bloxham doesn’t believe the RBA will cut again at any stage this year, while ANZ’s Warren Hogan believes there’s a 50% chance the next decision, which falls on the Melbourne Cup, will see the RBA cut rates again.
AMP’s Shane Oliver said key data would need to be much weaker to see another cut next month.
“To get the RBA to cut again we'd need to see some pretty weak data in the economy and/or further strength in the Aussie dollar. If that happened they'd start to get concerned again and see that as a reason to cut further,” he said.
Other economists, like Janu Chan from st.george believe there’ll be another rate cut in November due to the recent strengthening of the Aussie dollar and other longer term factors.
“We're expecting the RBA will cut in November. We have had that forecast for sometime and that's largely reflective of the softer labour market and soft domestic demand and with the Australian dollar strengthening in the past weeks or so that just strengthens the case for that to occur,” she said.
Scott Haslem - UBS
"November will be a function of where the next print on the unemployment rate goes and where the next print on inflation goes. I personally think that the hurdle for the RBA to cut again is quite high, but if we did get a one handle above the core inflation data and a sixth handle in front of the unemployment rate it would certainly make the November cut a close call.
What does this mean for homeowners?
finder.com.au spokesperson Michelle Hutchison says fixed rate loans are dropping, which could be an indication of an impending rate cut in November.
“Lenders are continuing to shake up the home loan market by competing harder and cutting their rates. For instance, we’ve seen 44 fixed home loans change their rates in September. The majority of which dropped their rates and out of those by an average of 0.19 percentage points," she said.
“Fixed rate reductions can be an indicator that the cash rate will follow so this could be a sign of another rate drop on Melbourne Cup next month.”
According to Mrs Hutchison, if you're planning on fixing your rate, it's important to carry out a comparison.
“So if you’re planning on fixing your home loan, it’s very important to compare deals or you could miss out on big savings. For instance, the lowest three-year fixed rate on finder.com.au is 4.64 percent and the highest is 5.34 percent. For a $300,000 home loan, that’s a difference of $128 in monthly repayments and over $4,600 over the three-year fixed period.”