The RBA starts the beginning of the new financial year by holding the cash rate at 2.75 per cent.
It was a move largely seen by most economists as a response to the fall in the Aussie dollar.
The Aussie dollar has seen a slump from the last cash rate cut in May from approximately 103.5 US cents to about 92.5 US cents. Glenn Stevens, Governor of the RBA said in a short statement that this was a factor in their decision, 'a reassessment by the market of the outlook for monetary policy in the United States has seen a noticeable rise in sovereign bond yields from exceptionally low levels'.
'The Australian dollar has depreciated by around 10 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.'
This was largely seen by most economists as doing the majority of the work for the RBA.
Who picked it?
All of the economists on finder.com.au’s expert panel forecast the RBA would hold rates again.
Janu Chan, an economist with St.George said the RBA will be monitoring the lower Aussie dollar in relation to unfolding developments such as the pace of development at coming meetings.
Savanth Sebastian from Commsec expects the RBA to cut again next month, but that this could depend on different political factors.
“...we're still expecting a rate cut in August - now that can shift if the Government comes out with a different date for the election,” Mr Sebastian said.
Bob Cunneen, a senior economist with AMP, agreed with this, saying the RBA wouldn’t see enough data to warrant a cut this month, but would be likely to cut next month.
“All things considered we're still of the view that they have to cut interest rates at least once, so it's more likely an August story after the CPI data for the June quarter comes out,” Mr Cunneen said.
Savanth Sebastian from CommSec
Why the RBA held the cash rate
On the view that the Aussie dollar has done a bit of the heavy lifting for the RBA. The lower currency is certainly helping to stimulate areas of the economy. I think the Reserve bank would be watching the impact of already low rates on the economy and seeing that there is a turnaround taking place on the housing front which will be a big driver of growth and more importantly the quarterly inflation numbers, which they pay a lot of attention to, comes out in late July. We still expect the likelihood that they will be cutting rates in August. On Tuesday they will talk about that they have the scope to do more with an easing bias in place. So we're still expecting a rate cut in August - now that can shift if the Government comes out with a different date for the election.
What does the RBA decision mean for homeowners?
Due to the fact the cash rate has been at a record low, the ABS shows that fixed rate home loan approvals continue to rise.
Jeremy Cabral, Publisher of finder.com.au says home owners should use this announcement to do a quick health check on their finances and compare home loans on the market and see if they can find a better deal to save money.
"If you are considering to fix your home loan there are some clear benefits in doing so. However, Aussies need to make sure they take the right step and do their research first." Its important to note that while you can have financial stability during the fixed period of a loan, if interest rates drop your rate won't drop with it.
“It’s a great time to take matters into your own hands despite the RBA announcement. Homeowners need to be savvy with their investment and do their research, weigh up the pros and cons, seek advice and see if they can find a better deal on their home loan” says Mr. Cabral.