RBA announces cash rate decision following consecutive cuts
After cutting the official cash rate two months in a row, the Reserve Bank has announced the outcome of its board meeting for August.
The RBA today has decided to keep the official cash rate on hold this month after making cuts in both June and July.
The cash rate was cut by 25 basis points in June down to 1.25 per cent, and then by another 25 basis points last month to the new record low of 1.0 per cent.
St.George Bank senior economist Janu Chan said while the RBA has signalled that it is open to lowering interest rates if needed, there is less urgency in its language than previously.
“After the back-to-back rate cuts in June and July, the RBA is therefore likely to pause,” Ms Chan said.
“Nonetheless, the soft pace of growth in the economy and softening leading indicators on employment point to a risk that the unemployment rate will rise, suggesting the RBA will act and lower official interest rates further later this year.”
QIC chief economist Matthew Peter correctly predicted that after cutting rates in the last two months, the RBA would pause this month.
“However, governor Lowe has placed the RBA in a difficult position by emphasising the view that the unemployment rate must hit 4.5 per cent before sustained wage growth can be achieved. This sets up another RBA rate cut before year-end,” Mr Peter said.
AMP chief economist Shane Oliver agreed that the RBA is now in a “wait and see mode” following the cuts in June and July.
“The RBA is waiting to see the impact of the rate cuts in June and July and tax refunds for low and middle-income earners,” he said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
