RBA holds cash rate steady

RBA holds cash rate steady

The Reserve Bank of Australia has elected to keep the official cash rate on hold at two per cent for the month of August.


The RBA has continued to hold the official cash rate at two per cent after cutting interest rates by 25 basis points at its May meeting.

The ANU's Centre for Applied Macroeconomics Analysis (CAMA) RBA Shadow Board noted there is "little new domestic data to guide the RBA this month".

"A Greek debt default and exit from the Euro have been averted, while the rout of the Chinese stock market continues," said the Shadow Board in its August statement.

"Official inflation equals 1.5 per cent, well below the RBA’s target band. The CAMA RBA Shadow Board on balance prefers to hold firm. It attaches only a small probability to the need for a rate cut."

AMP chief economist Shane Oliver said not enough has changed since the RBA's last meeting to justify a rate cut.

"There is not a national housing bubble, but there is one in Sydney and it will start to reverse in 2017," Mr Oliver said.

"House prices generally are likely to fall (probably only 5-10 per cent) around 2017 when or if interest rates start to rise," he said.

On the subject of house prices, Westpac chief economist Bill Evans said there is no evidence that the regulators' (the RBA's and APRA's) "greater scrutiny of investor housing" is affecting growth.

"We are currently looking for some modest improvement in growth in 2016 back towards around three per cent, a level that would likely maintain steady rates," Mr Evans said.

"Accordingly we maintain our call that rates will remain on hold over the course of 2015 and 2016," he said.

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