Cash rate remains on hold in December

Cash rate remains on hold in December

The Reserve Bank of Australia has elected to keep the official cash rate on hold at its December monetary policy meeting.


For the 16th month in a row since August 2016, the RBA has elected to keep the cash rate on hold at 1.5 per cent.

According to a statement by ANU’s Centre for Applied Macroeconomic Analysis (CAMA) RBA Shadow Board, there was “no need” for a rate change before Christmas.

“There has not been any significant news from the global economy to revise the overall outlook,” the statement said.

CAMA RBA Shadow Board member Mark Crosby said that the RBA had signalled that it would not raise the cash rate anytime soon.

“Whether or not this is wise doesn’t matter. The RBA will sit on their hands for the next six months at least,” Mr Crosby said.

“The economy is clearly doing well, and monetary policy has done its job in terms of supporting the economy in recent years.

“It is time for the central bank to start normalising policy, and for other policy arms to support labour markets and productivity.”

AMP Capital’s chief economist, Shane Oliver, pointed to an “eventual rate hike” thanks to “strong business conditions, strong employment and the RBA’s own expectations for stronger growth”.

“But low inflation, record low wages growth, the slowing housing cycle, uncertainty around consumer spending and the still too high [Australian dollar] argue for flat or even lower rates,” Mr Oliver said.

Members of the CAMA RBA Shadow Board felt 17 per cent confident that the cash rate should remain the same a year out from now; 8 per cent confident in a decreased cash rate; and 76 per cent confident in an increased cash rate.

 

Cash rate remains on hold in December
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