RBA opts to hold fire

Adam Smith 6 September 2016

The Reserve Bank of Australia has met expectations with its cash rate decision today.

At its meeting today, the final for outgoing Reserve Bank governor Glenn Stevens, the RBA board chose to leave the cash rate on hold at 1.50%. The decision follows last month’s 25 basis point cut.

The hold was widely expected by economists. One hundred per cent of the experts surveyed in finder.com.au’s monthly RBA survey predicted that the Reserve would choose to hold the official cash rate steady. CoreLogic head of research TIm Lawless said the RBA would be watching the market to analyse the full effect of its last cash rate cut.

“The RBA is likely to be keeping a keen eye on the housing market; since the May rate cut and subsequent cut in August, many of the key housing market indicators have bounced higher.  Auction clearance rates have returned to the highest reading in more than a year, albeit on lower volumes.  CoreLogic’s hedonic index has seen some acceleration in the rate of capital gain across the already hot Sydney and Melbourne markets and the value of investor housing finance commitments have recently rebounded to the highest levels since August last year.   In contrast, there has been a consistent wind down in transaction numbers which implies market demand may be getting exhausted,” he said.

Lawless said the RBA was likely to deal another cut in November, when it has more information with which to make a decision.

“The most likely timing will be the November RBA meeting when September quarter inflation data is available. Another low inflation reading combined with a stubbornly high dollar could result in the cash rate moving lower,” he said.

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