No Surprise At All – Rates On Hold

It is no surprise at all that the Reserve Bank has decided to leave the cash rate on hold at 2% for the 11th consecutive month. There continues to be talk in the market place that the RBA may need to drop the cash rate by another 25 basis points possibly by the start of the 4th quarter of the year.

There are many things the RBA needs to take in to account at the moment and there may well be some difficult decisions ahead. Some of these factors are;

  • The rising Australian dollar
  • The two speed economy between NSW, Victoria and the rest of the country
  • Federal Reserve in the U.S.A being reluctant to make further rate changes
  • The Sydney & Melbourne property market still performing better than expected
  • A federal election date of 2nd July pencilled in.
  • The ASX index back down below 5,000
  • Retail numbers 
  • New building approvals 

Governor Glenn Stevens had this to say “"New information should allow the board to assess the outlook for inflation and whether the improvement in labour market conditions evident last year is continuing," he noted.

"Continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand."

If you would like to read the full media release by the RBA, please visit;

http://www.rba.gov.au/media-releases/2016/mr-16-08.html