The Reserve Bank of Australia made no changes to the official cash rate yesterday. The interest rate remains at its record low of two percent for the fourth month in a row.
The move to maintain the current cash rate was widely expected by economists and traders. Many experts were one in saying that the central bank was maintaining a “wait-and-see” attitude following the two rate cuts in February and May.
RBA Governor Glenn Stevens said it was appropriate to leave the cash rate as is. He added that the low interest rates were acting to support borrowing and spending. The Governor also focused on the international economy pointing out the softening conditions in China and the strong U.S. economy.
With regards to the housing market, Stevens noted the rise in Sydney’s dwelling prices and varying trends in other cities. He revealed that the central bank is now working with other regulators to assess and contain risks that may result from the market.
Economists are predicting that the Reserve Bank may be forced to lower rates once more by November in time for the Melbourne Cup Day. The forecast is a cut to 1.75 percent on the first Tuesday of November. If this happens, mortgagees and spring buyers will benefit the most.
The RBA is known for moving rates usually on Melbourne Cup day. This is due to the fact that it does not normally make decisions in December or in the first month of the new year. A slightly cooling housing market is seen as another reason for a possible rate cut.
Merril Lynch chief economist Alex Joiner, on the other hand, believes otherwise saying that the declining Australian dollar will prevent the RBA from further lowering the cash rate. He said that the Bank’s move to maintain the record low level to help stimulate the economy will not stay there forever.
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By Wendy Chamberlain
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With a passion for all things real estate spanning 18 years, Wendy loves that her role as a
