Reserve Bank stays hand in April 2017 cash rate decision
The Reserve Bank has again left the cash rate on hold, even as concerns mount over rising house prices.
At its meeting today, the Reserve Bank board left the cash rate untouched at 1.50%. The decision was widely anticipated, with 37 of the 38 experts polled in finder.com.au’s Monthly RBA Cash Rate Survey predicting a rate hold.
The decision to keep rates on hold came as house prices have continued to set a booming pace for growth. CoreLogic figures released yesterday show capital city house prices grew in March at their fastest annual pace since May 2010. CoreLogic research head Tim Lawless said the RBA had to balance the surging housing market with other parts of the Australian economy.
“It seems the RBA is stuck between a rock and hard place. They aren’t likely to push rates higher just to quell housing market exuberance; doing so could push inflation lower and the Australian dollar higher as well as cancel out some of the much needed stimulus that many sectors of the economy are benefitting from. On the other hand, the RBA would be loath to push rates lower out of concern for adding further fuel to an already over heated housing market,” Lawless said.
Lawless said the RBA would rely on other factors to curb housing demand.
“With the cash rate likely to remain on hold, at least for the remainder of the year, it’s looking increasingly like other factors will be necessary to undertake the heavy lifting required to bring about a housing market slowdown. Mortgage rates have been rising despite the steady cash rate, which will act as a disincentive to market demand,” he said.
“Additionally, market driven factors including high apartment supply, record low rental yields and affordability constraints should gradually contribute to slower housing market conditions. If the housing market continues to accelerate despite these combined factors, there is a very high likelihood of further policy announcements that will more firmly muffle investment demand,” Lawless said.