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RBA ends 2016 with December rate hold

RBA Dec 2016

The Reserve Bank has ended the year by leaving the official cash rate on hold at 1.50%.

The RBA decided today at its final board meeting of 2016 to leave the cash rate untouched. The move was widely expected, with all 35 experts surveyed in’s monthly RBA survey predicting no movement from the Reserve.

The decision came in spite of inflation tracking below the Reserve Bank’s 2-3% target band, but CoreLogic head of research Tim Lawless said the RBA had good cause to overlook the low inflation numbers.

ANALYSIS: Which lenders have moved rates in December already?

“In balance, there are plenty of reasons why the RBA would keep rates on hold such as the rebound in housing market strength and housing investment activity, a surge in commodity prices, and potentially a lower Australian dollar as the US looks to increase interest rates,” Lawless said.

Lawless said the RBA would also have taken the reaccelerating of housing values into consideration in making its decision.

“The May and August rate cuts were also accompanied by an aggressive rise in investment activity. A decision to cut the cash rate to new record lows could add further incentive to investors and owner occupiers which could push housing values even higher,” he said.

The RBA board next meets in February 2017. While no movement is expected in the near future, a growing number of economists expect the Reserve Bank to begin lifting rates in 2017 or 2018. Lenders, meanwhile, have already begun to lift interest rates in spite of the RBA's decision to remain on the sidelines.

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