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RBA remains on sidelines at June 2017 cash rate meeting


RBA June 2017 feature image

The Reserve Bank has left the cash rate on hold, but there are growing signs a cut could be on the cards.

At its official June 2017 board meeting today, the Reserve Bank of Australia (RBA) left the official cash rate untouched at 1.50%. The result was in line with market expectations, with all 33 of the experts polled in the Monthly RBA Survey correctly predicting the rate hold.

While much of the market commentary in recent months has pointed toward an upward trajectory for the official cash rate, there are growing signs that the RBA’s easing cycle may not be over.

“While the cash rate has remained on hold in June, financial markets are starting to lean more towards a cut in official interest rates rather than a stable rate setting. Importantly, one of the key barriers to rate cuts - the hot housing markets of Sydney and Melbourne - have shown signs of slowing. CoreLogic has reported only one month of negative dwelling value movements, albeit during the seasonally weak month of May. However, if this recent slowing develops into a more sustained trend, the RBA may be able to consider alternative scenarios to a steady cash rate,” CoreLogic research head Tim Lawless said.

Lawless said the last RBA rate cuts in May and August of 2016 added heat to the housing market, but that another rate would be less likely to reignite the market.

“The situation is very different now, with new macro prudential regulations dampening investment demand while mortgage rates have stepped higher, particularly for investors and interest-only borrowers,” Lawless said.

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